August 3, 2021
China does not have an inheritance tax. The Law of Succession in China is set out under the Chinese Civil Code Article 770-781. Once you are a resident of Mainland China, you will be subject to succession law under Mainland China rules and regulations.
If someone is a non-resident of Mainland China, then that person may be subject to the inheritance rules of their home country or if they do not have a home country, then to the laws in which they resided while living, depending on where they live after the death of the deceased person.
Many countries follow international laws governing succession. Still, these differ from place to place, and each situation should be considered individually.
This article will focus on inheriting according to Chinese law.
How is the Estate Divided?
The Law of Succession in China governs succession to moveable and immoveable property. The person inheriting has the right to demand that the estate be distributed according to Chinese law. This means that each beneficiary can inherit up to half of the real estate under Mainland law. Still, if they are willing, they may renounce their share, thus allowing other beneficiaries who have a greater entitlement to take advantage of their share.
It should also be mentioned that there is a possibility for a court or notary public to rule otherwise. Still, these rules cannot be applied retrospectively. Also, certain individuals may enjoy an extra privilege for inheritance where they will receive more than the other beneficiaries. This may be because of a pre-nuptial agreement or an express wish made by the deceased. If this is not the case, then those who enjoy such privileges will stand alone and inherit everything, and everyone else is excluded completely.
What Happens to Assets Overseas?
The Law of Succession covers all assets acquired during the marriage. If one spouse is a Chinese national and the other foreign, each person has rights over their own estate as per Chinese succession law. The separate assets cannot be combined unless the couple is married under Chinese law. Still, even then, such an issue would have to go through a lengthy process of proving that it was done for love rather than convenience.
As per Article 844 of the Chinese Civil Code, a foreign national who is not a resident of China according to Article 845 cannot claim succession rights even if they have been married for several years to a Chinese citizen. This means that no matter how long you have lived in China as a family unit and regardless of your children being registered as having Chinese nationality, you will be treated equally regarding inheritance under marriage laws.
If one spouse dies, their assets are governed by the law in which they were registered at the time of death, unless it has been automatically transferred into an account linked to both parties jointly, such as a joint bank account. In this case, the law governing that particular country will apply because it is likely that both parties were involved in certain assets.
How is a Will Carried Out?
No specific rules govern a foreigner making a will in China. However, if you do not want your assets to be distributed according to Chinese law, then it is advisable for any wills made to include language that specifically excludes the rights of the Law of Succession in China. For example, many foreigners living in Beijing choose to leave their estate either through means of an inheritance or via donation to charities upon their death, so they, therefore, write into their will that all previous willing or gifts are revoked and re-donated under new conditions specifically excluding Chinese succession laws.
However, if someone dies without having written such changes into their will, this does not mean that they cannot, later on, carry out these wishes. Instead, it simply means that the court may not adhere to these specific conditions when deciding how to distribute their assets or whether they should be distributed at all, for that matter.
Please contact us (inquiries@chinalawsolutions.com) to get in touch with an experienced advisor who can assist with preparing for your inheritance in China. All inquiries are treated as confidential.