It is one of the most basic inter-generational wealth transfer devices, but alarming new figures show that many wealthy individuals in Asia do not draw up a will, creating a host of potential problems.

More than two thirds (70 per cent) of expatriates in Hong Kong have not yet written a will, a recent survey has found, an alarming statistic that is not surprising to professionals in the legal arena.

In a recent client survey, independent financial advisor and wealth manager, The Henley Group, found 48 per cent of respondents with children under the age of 18, and 59 per cent of property owners did not have a will.

At a time when wealth structuring is becoming increasingly important in the Asian region as first and second generations of entrepreneurs rise to prominence, the report is a reminder that the basic route of writing a will remains at the heart of inter-generational wealth transfer and control. 

While many may be left perplexed by these numbers, practitioners at legal firm Herbert Smith Freehills said writing a will is a common oversight made by individuals.

"The survey's findings will sadly not be surprising to professionals active in this area. Perhaps unsurprisingly, writing a will is not usually top of someone's priority list and is often something they cannot quite bring themselves to do,” Richard Norridge, senior associate at Herbert Smith Freehills told WealthBriefingAsia, in a statement.

Mark Rawson, chief executive of The Henley Group said: “Most people know that they probably should write a will but they put it off perhaps fearing their own mortality, or that it will cost a lot of money or be overly complicated,” in a statement released by the firm this week.

Consequences

“Not having a will can lead to unintended and unexpected consequences and significantly complicate the process of administering someone's estate after they have passed away,” Norridge said.

According to Rawson, often people assume that in the worst case, the law will take care of things; that their spouse will get all the assets upon death, or that in the event that both parents die, a close blood-relative will be able to take care of the kids. However, “things are not that clear cut and with a little bit of effort, a lot of heartache and delay can be avoided,” he said.

“We have heard of cases where the husband dies without a will, and the wife expects to receive the entitlement, much of which she has contributed to herself financially. However, according to Hong Kong intestacy laws, if the husband has surviving parents, the parents can be beneficiaries of up to 50 per cent of the entitlement,” Rawson continued.

State controls

It is particularly alarming when parents don’t make a will - Hong Kong law states that when there isn’t a will indicating a child’s new legal guardian, then the state takes charge of appointing guardians, according to Rawson.

“People also assume that a relative can jet in and pick up the kids. This is not the case and there are formalities to go through, and until these are resolved in the courts, the child or children may be taken into care,” he said.

DIY

A do-it-yourself job of will-writing is not much better - although it is viewed by many as a way of saving money, too often it is a “false economy”, said Norridge.

"We have been involved in a number of cases where testators have produced wills which are imprecise and extensive advice (and sometimes proceedings) is required to decipher exactly what was intended,” he said.

The recent high profile Nina Wang case comes to mind.

“Anyone who has been resident in Hong Kong for a while will recall the drama that surrounded the estate of Asia’s richest woman. Inconsistencies in her will led to several improperly attested claims to her entitlement, including a forged will,” said Rawson.

“The matter was finally settled in court three years post-mortem, and after huge costs and publicity,” he said.

Act now

The use of lawyers on its own will not necessarily make a will unchallengeable, said Gareth Thomas, partner and head of commercial litigation practice, at Herbert Smith Freehills Hong Kong.

“Challenges on bases such as undue influence and lack of mental capacity are becoming more common and professionals should take steps (and carefully document them) to satisfy themselves that these issues do not arise."

With regards to the role of advisors, Thomas said: "Warning clients about the potential consequences (in particular, the legal costs) of not having a will can be a significant incentive for those clients to prepare a will."

“Get professional advice, two signatures and have it [the will]nprofessionally stored,” said Rawson.