How to approach succession planning across Mainland

A family's wealth rarely respects the boundary between Hong Kong and Mainland China. Operating businesses sit in one jurisdiction, liquid assets in another, property in both, and the next generation may be resident in a third. When one generation gives way to the next, every one of those positions needs to move in the right order – and under the right law.

Succession planning across Hong Kong and Mainland China requires a structured sequence: identify where assets sit and which law governs each, map the family members' residence and domicile positions, assess how Mainland forced-heirship principles interact with any Hong Kong trust or will, and then select the instrument – trust, will, or a combination – that holds across both systems. The governing instruments in Hong Kong are the Trustee Ordinance (Cap. 29) and the Wills Ordinance; in the Mainland, the Civil Code's inheritance chapter applies, with no direct equivalent to an Anglo-common-law discretionary trust. Since the Trustee Ordinance was substantially reformed with effect from 1 December 2013, Hong Kong has offered one of the strongest trust firewall protections in Asia – a material advantage when Mainland forced-heirship claims are a concern.

This guide walks through the practical sequence: the cross-border decision tree, the gate at each step, the document stack, and the mistakes that cause structures to fail after the event they were designed to address.

Step 1 – Map where the assets and the family members actually sit

Every succession plan begins with a jurisdictional inventory. Until you know which law governs each asset and each family member, you cannot choose the right instrument.

Real property follows the lex situs (the law of the place where the property is located). A flat in Shanghai is governed by the Mainland Civil Code on inheritance; a flat in Kowloon is governed by Hong Kong law. Shares in a Hong Kong company pass under Hong Kong law if the register is in Hong Kong. Shares in a BVI or Cayman holding entity pass under the law of incorporation of that entity. Bank deposits, listed portfolios and insurance products have their own governing-law rules, typically tied to where the account or policy is maintained.

Family members add another layer. A person domiciled in the Mainland will have their worldwide movable estate governed, at death, by the Mainland Civil Code under Hong Kong's conflict-of-laws rules. A person domiciled in Hong Kong will have Hong Kong law govern their movable estate. Where the family spans generations living in different places – a founder in Guangzhou, a child in Hong Kong, a grandchild studying abroad – the domicile question is not academic. It determines which inheritance rules apply and which court has authority.

In our cross-border practice, the first mapping exercise routinely surfaces assets that the family had not thought of as cross-border: a corporate account held by a BVI entity, an undocumented loan from a Mainland parent to a Hong Kong subsidiary, a life-insurance policy issued in one jurisdiction naming a beneficiary resident in another. These do not plan themselves. The gate at this step is a clean asset-and-person map before any documents are drafted.

Step 2 – Understand how Mainland forced-heirship principles interact with your Hong Kong instruments

The Mainland Civil Code contains forced-heirship provisions (mandatory minimum shares for defined classes of heir, primarily spouses, children and parents), which can reach across borders when a Mainland-domiciled or Mainland-resident family member is involved. Hong Kong has no forced-heirship regime of its own. That contrast is the central cross-border tension in almost every matter of this kind that comes to our desk.

How does the tension arise in practice? Consider a founder domiciled in the Mainland who establishes a Hong Kong discretionary trust holding BVI shares over a Mainland operating group. The trust is governed by Hong Kong law and the Trustee Ordinance. On the founder's death, a Mainland heir may argue that Mainland forced-heirship rules apply to the founder's worldwide movable estate – including the value of the trust assets. Whether that argument succeeds depends on: (a) whether the Mainland court accepts Hong Kong's conflict-of-laws rules; (b) whether the trust structure satisfies the conditions for Hong Kong's firewall protection; and (c) how the founder's domicile is characterised.

The 2013 reform of the Trustee Ordinance strengthened Hong Kong's position materially. The reform expressly protects trusts governed by Hong Kong law against foreign forced-heirship claims, and it confirms that a trust is not invalidated by the settlor reserving certain powers. It also abolished the rule against perpetuities and excessive accumulations for Hong Kong trusts. Those three changes together make a properly structured Hong Kong trust a serious tool for a cross-border family – but only if the structure is put in place before a claim arises. A trust created after the event it is designed to address may be set aside or challenged in both jurisdictions.

The gate at this step: before selecting any instrument, the adviser must establish which succession law governs each asset class and each family member, and whether Mainland forced-heirship provisions can reach the intended structure. That analysis drives the choice of instrument, not the other way around.

Step 3 – Choose the instrument for each layer of the structure

For most cross-border families spanning Hong Kong and Mainland China, no single instrument does everything. A combination of a Hong Kong trust, jurisdiction-specific wills, and – where relevant – a well-drafted family constitution or shareholders' agreement is typically required.

The Hong Kong discretionary trust governed by the Trustee Ordinance is the strongest available tool for: holding offshore and Hong Kong assets away from a Mainland forced-heirship claim; providing a mechanism for multi-generational distributions without triggering a succession event on each death; and separating legal from beneficial ownership in a way that is recognised in common-law jurisdictions and, with appropriate documentation, can be presented clearly to Mainland advisers and courts.

A will remains necessary for assets that cannot or should not be transferred into a trust – principally, Hong Kong-situated property where stamp duty or financing considerations make a lifetime transfer impractical. Separate wills for each jurisdiction are advisable: a Hong Kong will dealing with Hong Kong assets; a separate Mainland will, executed in accordance with Mainland Civil Code formalities, dealing with Mainland-situated assets. A single will drafted under Hong Kong law will not automatically be recognised in the Mainland without a notarisation and authentication process that adds time and cost after death. Equally, a Mainland-drafted will may not be valid for Hong Kong purposes without evidence that it meets Hong Kong execution requirements.

Where the family holds an operating business, a shareholders' agreement or a family-held company with a carefully structured share class and transfer restriction can supplement the estate-planning instruments. The gate at this step is confirming that the instruments do not conflict with one another – for example, that a will does not purport to deal with assets already settled into a trust, and that a shareholders' agreement does not inadvertently override a testamentary disposition.

See our related work on private trust structures for family assets and how similar layered approaches operate in a cross-border context.

Step 4 – Address residence and domicile before the structure is fixed

Residence and domicile are not the same concept, and confusing them is one of the most common mistakes in cross-border succession planning. Residence is where a person lives. Domicile is the legal concept that determines which law governs their movable estate on death – and it turns on where a person regards as their permanent home, not simply where they have been living.

A founder who has lived and worked in Hong Kong for twenty years may still be domiciled in the Mainland if they have never formed an intention to make Hong Kong their permanent home. That is a question of fact, evidenced by a range of matters: where children are educated, where property is held, language of communication, expressed preferences about where to retire. The answer matters enormously for succession planning, because it determines which law governs the movable estate and whether Mainland forced-heirship rules apply.

Where a change of domicile is contemplated – and in some families it is a live question – the planning must be done carefully, with proper evidential support, before the estate plan is finalised. A domicile position asserted without contemporary documentation is vulnerable to challenge by an heir who would benefit from a different characterisation.

Residence also matters for tax. While Hong Kong has no estate duty and levies no capital gains tax and no withholding tax on dividends, the Mainland has its own rules on inheritance and gift taxation that apply to Mainland-resident and Mainland-domiciled individuals. Those rules are distinct from Hong Kong's tax position and must be factored into the structure independently. Our colleagues in the private wealth practice regularly advise on the interaction between these positions.

Step 5 – Assemble and authenticate the document stack

What documents does a cross-border succession structure require? The answer varies with the family's asset map, but a complete file for a family spanning Hong Kong and Mainland China typically includes the following.

A trust deed, governed by Hong Kong law and executed in accordance with the Trustee Ordinance, setting out the discretionary powers of the trustee, the class of beneficiaries, the reserved powers of the settlor (within the limits that preserve validity), and the governing law and jurisdiction clause. A Hong Kong will, executed with two independent witnesses and covering Hong Kong-situated assets not within the trust. A Mainland will, executed in accordance with Mainland formalities and limited to Mainland-situated assets. A letter of wishes addressed to the trustee, which is not legally binding but guides the exercise of discretion and reduces the risk of later disputes among beneficiaries.

Where the structure involves a corporate holding layer – a BVI or Cayman company above the Hong Kong operating entities – the share register, the register of members, and any nominee or beneficial-ownership documentation need to be current and consistent with the estate plan. Shares held in a name that differs from the beneficial ownership reflected in the trust or will create an authentication gap that becomes expensive to close after death.

Authentication is the step that most families underestimate. Documents executed in Hong Kong for use in the Mainland – or vice versa – require notarisation, apostille or authentication steps depending on the document type and the purpose. A Mainland-executed power of attorney intended for use in a Hong Kong probate proceeding must go through a defined authentication route. The gate at this step is ensuring that every document in the file is both valid in its jurisdiction of execution and capable of being presented in the other jurisdiction where it will be relied upon.

Step 6 – What foreign and domestic counsel typically get wrong

In our cross-border practice, we see a recurring set of errors that cause well-designed plans to fail at the moment they are needed. They are worth naming directly.

The first is drafting a single will for worldwide assets. A will drafted under Hong Kong law that purports to deal with Mainland real property will, in most cases, need to go through a lengthy process before a Mainland court accepts it. The Mainland has specific formal requirements for testamentary instruments, and a common-law-style will does not automatically meet them. The fix is two separate wills with a clear jurisdictional scope limitation in each, drafted at the same time to ensure they do not conflict.

The second is settling a trust and then continuing to treat the assets as the settlor's own. If the settlor operates bank accounts in the trust's name but directs all transactions personally, signs contracts as if the assets were not in trust, and commingles trust and personal assets, the trust is at risk of being characterised as a sham. That characterisation, if made by a Mainland court, would strip the firewall protection that the trust was designed to provide.

The third is ignoring the Significant Controllers Register requirement. Under the Companies Ordinance (Cap. 622), Hong Kong-incorporated companies must maintain a Significant Controllers Register (a register of beneficial owners and controlling persons), a requirement in force since 1 March 2018. When a succession structure involves a family-held Hong Kong company, the SCR must be updated to reflect changes in beneficial ownership. An outdated SCR creates a compliance gap that comes to light precisely when a probate or estate administration is under way.

The fourth – and perhaps the costliest – is deferring the plan until a health event or a family dispute accelerates the timeline. Structures put in place under time pressure, without the full mapping exercise described in steps one to four, are the ones most likely to be challenged. The gate at every step of this guide is the same: do the work before the event, not after.

For a related perspective on cross-border family planning instruments, see our guide on prenuptial and matrimonial property planning for cross-border families.

Step 7 – Decision checklist: is your structure ready?

Before treating the succession plan as complete, a cross-border family and their advisers should be able to answer yes to each of the following questions. If any answer is no or uncertain, that is the point at which to engage counsel.

Has a complete asset-and-person jurisdictional map been prepared, identifying the governing law for each class of asset and the domicile position of each key family member? Have the Mainland forced-heirship rules been assessed against the structure, and is the trust or other instrument positioned to withstand a claim? Does each jurisdiction have its own validly executed will, limited in scope to assets in that jurisdiction, with no conflict between them? Has the trust been administered as a genuine trust, with independent trustee decision-making and segregated assets? Are all corporate beneficial-ownership registers – including the SCR for Hong Kong companies – current and consistent with the estate plan? Has the authentication and notarisation chain been documented for each instrument that will need to be presented cross-border? And has the plan been reviewed in the last three years to reflect changes in family membership, asset composition, or the governing law in either jurisdiction?

A plan that answers yes to all seven is materially more likely to work as intended. A plan that answers no to any of them carries a structural gap that will be found – if not by the family's advisers, then by a court or a challenging heir.

Related practices

Private Wealth – succession, trust structuring, asset protection and family-office advice across jurisdictions
Holding Structures – BVI, Cayman and Hong Kong holding-layer design for cross-border asset groups

Frequently asked questions

What are the main risks in succession planning across Hong Kong and Mainland China?

The principal risks are: Mainland forced-heirship claims reaching assets held in a Hong Kong trust or covered by a Hong Kong will; instruments that are valid in one jurisdiction but not recognised in the other without further authentication; a mismatch between the documented ownership structure and the reality of how assets are controlled; and deferred planning that leaves the family without instruments in place when a succession event occurs. Each risk is manageable if addressed in the right order and before the event.

What documents are needed for succession planning across Hong Kong and Mainland China?

A complete cross-border succession file typically includes: a Hong Kong trust deed governed by the Trustee Ordinance; a Hong Kong will covering Hong Kong-situated assets outside the trust; a separate Mainland will, executed to Mainland formalities, covering Mainland-situated assets; a letter of wishes to the trustee; current corporate beneficial-ownership documentation, including the Significant Controllers Register for any Hong Kong company; and authenticated copies of all instruments prepared for cross-border use. The specific documents vary with the family's asset and residence map.

What does the route look like for succession planning across Hong Kong and Mainland China?

The route runs in seven steps: map assets and domicile by jurisdiction; assess the Mainland forced-heirship position; select instruments for each layer of the structure; confirm residence and domicile before finalising; assemble and authenticate the document stack; identify and close the common structural errors; and verify against the decision checklist. The sequence matters – instruments drafted without the initial mapping are routinely the ones challenged or found unenforceable at the point they are needed most.

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.

How to approach succession planning across Hong Kong and Mainland China