Jurisdiction - China
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China – Guide To Private Wealth.

 14 September, 2012

 

  

1 Is a Will a public document in your jurisdiction?
 
Wills may be deposited with a public notary but are not vailable for inspection by the public. There is no concept of probate in PRC law.
 
2 What are the principal formal requirements for a valid Will or other testamentary disposition in your jurisdiction? Please include in your answer any special requirements relating to execution.
 
Article 17 of the Succession Law provides for five types of Will that are recognised in the PRC:
 
  • (i) A Notarial Will, being a Will made in writing before a notary and signed and dated by the testator and notary;
  • (ii) A Holographic Will, being a Will in the testator’s own hand and signed and dated by the same;
  • (iii) A Witnessed Will, being a Will written in the witness’ hand and signed and dated by the testator and by two or more witnesses;
  • (iv) A Sound Recording Will, being a recording of the oral testimony of the testator, made in the presence of two or more witnesses (the Succession Law does not require the witnesses to state their names on the recording but it is common practice to do so); and
  • (v) An Oral Will, being the oral testimony of the testator made in the presence of two or more witnesses and only being valid in an emergency, lapsing when the emergency has receded and the testator is able to make his Will in another form. The statute itself does not define what constitutes an emergency and how long the Will remains valid after the emergency has receded. However, according to a practice guide (See Chinalawinfo.com (one of the leading legal databases in the PRC), an emergency under Article 17 includes circumstances where the testator is “at death’s door”, in a war or is involved in an accident, and his/her life is in danger and s/he has no time to or there is no way for him/her to make a Will in any other form.
 
It should be noted that the status of a typewritten witnessed (but not notarised) Will is not entirely certain in Chinese law. The safest form to adopt for those wishing to avoid challenges is the Notarial Will.
 
3 In what circumstances will a court in your jurisdiction regard a Will as duly
executed even though it does not fulfil these formal requirements (for example, because it fulfils the requirements for the execution of a Will in another jurisdiction)?
 
Neither the Succession Law nor the Several Opinions on Implementing Succession Law issued by the Supreme People’s Court on 11 September 1985 (the “Several Opinions”) provide for such a Will to be recognised in the PRC
courts.
 
4 How can a Will be amended or revoked and what is the effect of marriage and divorce in this regard?
 
Article 20 of the Succession Law provides that a testator may revoke or amend a previous Will. The normal method of revocation is to make a new Will in one of the forms described in section two. It should be noted that later Wills only revoke earlier ones in so far as they ‘conflict’ and a Notarial Will may only be revoked or altered by a subsequent Notarial Will. Under Article 39 of the Several Opinions, a Will may be treated as wholly or partly revoked, if the testator’s subsequent behaviour is ‘inconsistent with’ that Will. It seems that this refers to cases in which, for example, a Will indicates that specific property is to pass to a named person but the testator subsequently destroys that property or transfers it to someone else. The testator’s behaviour results in ‘the vanishing or assignment of a legacy in whole or part.’

  

Although it is not prohibited under PRC law to amend a Will, it is best practice not to do so. Instead, the original Will should be revoked and a new Will created. 
 
Marriage does not automatically revoke or otherwise affect a Will made before marriage  unless the Will provides otherwise. Likewise, divorce does not automatically revoke or otherwise affect a Will made before divorce unless the
Will provides otherwise.
 
5 Can an overseas Will govern movable and immovable assets in your
jurisdiction?
 
Article 36 of the Succession Law and Article 63 of the Several Opinions provide that the law of the deceased’s country of domicile at the time of death shall govern the succession to movable assets situated in the PRC. The domicile of the
testator is the place where s/he was habitually resident (being the resident of the testator for more than one year) at the time of death (see Articles 8 and 15 of the General Principles of Civil Law and Article 5 of the Several Opinions on the
Civil Procedure Law issued by the Supreme People’s Court on 14 July 1992).
 
In the case of immovable property, the lex situs (the law of the place where the property is located) shall apply.
 
Where treaties or agreements exist between the PRC and foreign countries, matters of inheritance shall be handled in accordance with such treaties or agreements.
 
6 Would an executor or administrator appointed under another jurisdiction be
recognised in your jurisdiction as having the power to collect in assets?
 
Neither the Succession Law nor the Several Opinions provide for such recognition.
 
7 Are there forced heirship rules in your jurisdiction?
 
Pursuant to Article 19 of the Succession Law and Article 37 of the Several Opinions, compulsory shares must be saved for an heir (being a spouse, child, parent, sibling or paternal and maternal grandparents) who is unable to work and has no source of income. However, the basis for calculating such compulsory shares is not provided for in statute.
 
Pursuant to Article 28 of the Succession Law and Article 45 of the Several Opinions, a portion of the estate must be reserved for any unborn child, whether illegitimate or legitimate. If the unborn child is stillborn, the reserved portion shall be dealt with in accordance with the intestacy rules.
 
8 In what circumstances can an executor, administrator or equivalent be
removed?
 
This is not provided for under PRC law. However, the basic requirements for serving as an executor or administrator are that the person must be at least 18 years old and of sound mind. If this requirement cannot be met (for example, the executor or administrator gets seriously ill or becomes mentally unable to act as executor or administrator), the executor or administrator is said to lack capacity and could therefore be removed.
 
9 Other than the failure to observe the formal requirements, how else can a Will
be challenged?
 
Pursuant to Article 22 of the Succession Law, a Will can be challenged if it is:
 
  • (i) Forged;
  • (ii) Made under ‘duress’ (undefined) or as a result of ‘fraud’ (undefined);
  • (iii) ‘Tampered with’; or
  • (iv) Made by a person who has limited or no capacity.
 
A Will in such circumstances will be rendered void (in full for a forged Will or a Will made under duress or as a result of fraud; in part relation to the portion of the Will that has been tampered with). 
 
Under PRC law, PRC citizens have full civil capacity at the age of 18. PRC citizens who are more than 16 years old but less than 18 years old and rely on their own labour as their chief source of livelihood are also deemed to have full civil capacity.
 
PRC citizens who are more than 10 years old but less than 18 years old, or are mentally ill but have not completely lost the ability to recognise or control their behaviour, have limited civil capacity and can only be engaged in civil activities that are appropriate for their age and intellect or to their mental health conditions.
 
PRC citizens who are less than 10 years old or are mentally ill and have completely lost the ability to recognise or control their behaviour, have no civil capacity.
 
10 If someone dies intestate, how are the assets administered and distributed?

Under Articles 10 and 12 of the Succession Law, there are two tiers of statutory successors:
 
  • (i) Spouse, children, parents are in the first tier, as are widowed daughters-in-law or sons-in-law who have made ‘predominant’ contributions to supporting their parents-in-law; and
  • (ii) Brothers, sisters and grandparents are in the second tier. Statutory successors in the second tier are entitled to share only if there are no first-tier successors.
 
The general rule of statutory succession where the deceased dies intestate is set out in Article 13 of the Succession Law. Statutory successors within a tier share equally, save that those who have made ‘predominant’ contributions to maintaining the deceased, or who lived with the deceased, may be given a larger share and, conversely, those who were able to maintain the deceased but ‘failed to fulfil their duties’ shall be given no share or a smaller share.
 
Article 11 of the Succession Law provides that where the deceased survived their child, the direct lineal descendants of the child shall inherit but shall ‘generally’ take only the share to which the child would have been entitled had they lived. In the absence of first-tier or second-tier beneficiaries, or a Will, Article 32 of the Succession Law provides for the estate to pass to the Chinese state or, if the deceased was a member of a Chinese collectively owned organisation, to
that organisation.
 
Article 19 of the Succession Law and Article 37 of the Several Opinions provide that compulsory shares must be saved for a descendent that lacks capacity to work and a source of income. However, the basis for calculating such compulsory shares is not provided for. There is no difference in the rules for the division of movable and immovable property where the person dies intestate.
 
11 If a Will is valid, can someone who feels they have been inadequately
provided for bring a claim?
 
Article 14 of the Succession Law stipulates that an “appropriate share” of the estate may be given to a person, who is not provided for under the terms of the Will, if they were dependent on the deceased prior to his/her death, are unable to work and have no other source of income. Article 14 goes on to stipulate that a share of the estate may also be provided for a person who was largely responsible for supporting the deceased prior to his/her death.
 
Under Article 31 of the Succession Law, a testator may enter into a legacy-support agreement with (1) a person, or (2) an organisation under collective ownership (the “Carer”). In accordance with the agreement, the Carer assumes the
duty to support the testator in his or her lifetime and attends to his or her interment after death, in return for the right to a legacy. Under Article 56 of the Several Opinions, if the Carer fails to perform their duties under the legacy-support
agreement without justified reasons and causes the agreement to be terminated, s/he must repay the maintenance/ support expenses paid by the individual or the organisation under the legacy-support agreement. In this situation, the Carer would have no right to the legacy.
 
Article 15 of the Succession Law provides that if the successors cannot reach an agreement on the time, method and shares for partitioning the estate through consultation, they may apply to a People’s Mediation Committee to mediate
the dispute or file legal proceedings in a People’s Court.
 
12 Is there inheritance tax (or equivalent such as stamp duty) in your jurisdiction?
 
No. However, proposals are from time to time made for the National People’s Congress to introduce such a tax.
 
13 Does your jurisdiction recognise trusts or other separation of legal and
beneficial ownership?
 
Yes.
 
14 Does a professional executor or trustee (or equivalent) in your jurisdiction
require a licence?
 
No licence is required.
 
15 Is your jurisdiction a party to the Hague Convention on the Law Applicable to
Trusts and on their Recognition?
 
No.
 
16 What are the duties of a trustee (or equivalent) in your jurisdiction?
 
Under the Trust Law, the duties of a trustee include the following:
 
  • (i) Duty to abide by the provisions of the trust documents and handle the trust affairs in accordance with the interests of the beneficiary (Article 25);
  • (ii) Duty to act with integrity and in a trustworthy and cautious way, and manage the trust property effectively (Article 25);
  • (iii) Duty not to take advantage of the trust property to seek profits for his own benefit (except to obtain remuneration in accordance with the Trust Law) (Article 26);
  • (iv) Duty not to convert the trust property into his own property (Article 27);
  • (v) Duty not to make transactions between his own property and the trust property, or make transactions between the trust properties of different settlors (except where the trust documents prescribe otherwise or with the approval of the settlor or the beneficiary, and where the transactions are made at a fair market price) (Article 28);
  • (vi) Duty to manage the trust property and his/her personal property separately and keep separate accounts (Article 29);
  • (vii) Duty to manage the trust property of different settlors separately and keep separate accounts (Article 29);
  • (viii) Duty to keep full records of the handling of trust affairs (Article 33);
  • (ix) Duty to provide a report regarding the management, utilisation and disposition of the trust property and the income and expenses to the settlor and the beneficiary every year (Article 33);
  • (x) Duty to keep the handling of trust affairs and related materials confidential (Article 33); and
  • (xi) Duty to distribute the trust property in accordance with the terms of the trust (Article 34).
 
17 In what circumstances can a trustee (or equivalent) be removed?
 
Article 39 of the Trust Law provides that a trustee can be removed under the following circumstances:
 
  • (i) The trustee dies or is declared dead;
  • (ii) The trustee is declared to be a person without civil capacity or a person with limited civil capacity according to law (see section nine);
  • (iii) The trustee, being a legal person or social organisation, has his capacity to act revoked by legal authorities according to law or is declared bankrupt;
  • (iv) The trustee, being a legal person or social organisation, disbands or loses legal qualification;
  • (v) The trustee resigns or is dismissed; or
  • (vi) Other circumstances provided by laws and regulations.
 
18 To what extent can a trustee limit its liability in a trust deed?
 
This is not provided for under the Trust Law.
 
19 How can a trustee protect itself if it needs to bring or defend proceedings?
 
This is not provided for under the Trust Law.
 
20 What regime is there in your jurisdiction if someone loses capacity e.g.
Guardianship Board?
 
Pursuant to the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (For Trial Implementation), the following factors,
amongst others, shall be considered by the court when determining capacity:
 
  • (i) The question of whether the civil activity in which a minor aged 10 or above is engaged is appropriate may be determined by the degree of connection of the conduct with his/her own life: can the minor understand his/her conduct and foresee the consequence of that conduct;
  • (ii) The determination of whether a civil activity conducted by a mentally ill person (who is generally unable to recognise his/her own conduct) is appropriate to his mental health may be made by evaluating the degree of connection of the conduct with his own life: can s/he understand his/her own conduct and foresee its consequence in this specific case;
  • (iii) A mentally ill person may be a person who cannot identify his own conduct if s/he is unable to exercise judgment and self-protection and does not know the consequences of his conduct;
  • (iv) To determine whether a party suffers from psychosis, the People’s Court will refer to the diagnosis of the judicial psychiatric department or the diagnosis given in hospital – where it is not possible to get such a diagnosis, the court may also determine the issue by relying on the recognised state of mental health of the party (provided no interested parties have any objection);
  • (v) Where any interested person proposes that one party suffers from psychosis (including dementia), and the People’s Court believes it necessary to make a determination, it shall determine whether the party has the capacity for civil conducts in accordance with the special procedures prescribed by the Civil Procedure Law; and
  • (vi) Proceedings shall be conducted in accordance with the special procedures as prescribed in the Civil Procedure Law for determining whether a mentally ill person is a person with limited capacity for civil behaviour.
 
Under the Civil Procedure Law, an interested person must file an application alleging that the citizen has limited or no capacity in the Basic People’s Court of the citizen’s locality. The court shall, where necessary, appoint an expert to evaluate whether the citizen has no or limited capacity. The court may review the findings of an expert independently commissioned by the applicant. If the court determines that a citizen has limited or no capacity, it is open for the court to reverse their decision if the citizen later provides evidence that s/he now has capacity.
 
According to Article 17 of the General Principles of the Civil Law of the PRC passed by the National People’s Congress in 1986, a person from the following categories shall act as guardian for a mentally ill person without or with limited capacity for civil conduct:
 
  • (i) Spouse;
  • (ii) Parent;
  • (iii) Grown-up children;
  • (iv) Any other near relative; or
  • (v) Any other closely connected relative or friend willing to bear the responsibility of guardianship and having approval from the unit to which the mentally ill person belongs or from the neighbourhood or village committee in the place of his residence.
 
Pursuant to Article 16 of the General Principles of the Civil Law of the PRC, the parents of a minor shall be his or her guardians. If the parents of a minor are deceased or lack the competence to be a guardian, a person from the following
categories, who is competent to act as guardian, shall be his or her guardian:
 
  • (i) Paternal or maternal grandparent;
  • (ii) Elder brother or sister; or
  • (iii) Any other closely connected relative or friend willing to bear the responsibility of guardianship and having approval from the minor’s parents or from the neighbourhood or village committee in the place of the minor’s residence.
 
In the event of a dispute over guardianship, the unit to which the mentally ill person belongs or the neighbourhood or village committee in the place of his residence shall appoint a guardian from among his near relatives. Only when there
is disagreement over this appointment, which leads to a lawsuit will the People’s Court take jurisdiction over this matter.
 
When considering which individual is most suitable to act as guardian, the following factors should be taken into account: (1) whether the individual has full civil capacity; (2) whether the individual is of sound finances; (3) whether the individual has a close relationship with the person under guardianship; and (4) the preference of the person under guardianship.
 
In the circumstances where none of the legal guardians are available or willing to act as guardian, then any of (1) the unit to which the mentally ill person belongs, or (2) the neighbourhood or village committee in the place of his or her residence, or (3) the civil affairs department shall act as his or her guardian.
 
 
For further information, please contact:
 
May Tai, Partner, Herbert Smith
may.tai@herbertsmith.com
 
Jessica Fei, Partner, Herbert Smith

  

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