In China it is unlucky to discuss death

Date: 26 Jun 2015


Catriona Syed, private wealth partner at Charles Russell Speechlys, says there is a great reluctance to deal with any estate planning in China as it is unlucky to discuss death.

What interesting cases of succession planning you have been dealing with?

I have been looking at planning for an African businessman who would like to leave his business empire to his children in perpetuity; there are interesting cross border issues as there are assets in many different countries. Although the children are currently all under the age of 18, we have also had to consider the US angle, because several of the children were born in the US.

I have also looked at the estate of a Far Eastern businessman whose will was last revised about 30 years before his death: his assets are held in many different structures and unravelling this in a way that is fair to all the extended family is quite a challenge.

What lessons we can learn from them?

The best succession planning requires open communication with the heirs, by the patriarch or matriarch, so that there are no surprises on death and everyone knows what his or her wishes are. The heirs should ideally be given a role, which need not be management of businesses, very often their talents may not lie in this direction, but could involve the family’s charitable or philanthropic objectives.

The heirs also need to be taught financial management starting at a relatively young age, so they have financial autonomy, but they also need to learn the responsibility that goes with wealth.

What are the particularities of succession planning in regions other than the UK, e.g. Middle East, Russia, China, India?

There are cultural differences which make the ideal succession planning impossible to achieve except for a very few families. For example, in the Middle East, although tax is not an issue in most countries yet, Islamic law may fetter the way in which a man can provide for his wife and children, particularly if he has no male heirs. The people who are best suited to running the family business may not be those who by law will inherit the largest share of it. This may also apply in countries with other forms of forced heirship. Russia has a form of forced heirship, and many Russians also have concerns about other “threats‚Äù to their wealth, such as state intervention.

In China there is a great reluctance to deal with any estate planning as it is unlucky to discuss death. There is also a cultural respect for the patriarch which does not encourage the children to make financial decisions or to be involved in business in any way other than carrying out the patriarch’s wishes. This makes it particularly difficult to start to plan early both for the family and for the business.

Indians have more of a culture of community property – it can be very hard to ascertain exactly who owns what. However, they are much more open with their children and are willing to actively involve them in business decisions. They also plan ahead and to make provision for housing, medical expenses, education and charity many years before these may actually be needed. There is an ability to see the big picture and to look down the generations in a way which some other cultures struggle with.

What trends are you seeing in succession planning you can tell us about?

Increased concern about political instability, so a raised interest in residence rights in more politically stable countries with a wide visa network. There is also an awareness that the governmental information gathering tools, through FATCA and the CRS, when it is introduced, are likely to result in increased taxation. If people are living in safer countries, there is a trend towards simplification, as the call for transparency makes the type of structure which gives confidentiality less efficient in tax terms, but in higher risk countries there are still advantages in maintaining trusts, foundations and corporate holding vehicles.

Any other comments?

Despite the threats to wealth, or perhaps because of them, people remain committed to preserving assets for their successors. The unprecedented levels of wealth created in the last twenty years have created a boom in the demand for the services of those able to advise and service this small international entrepreneurial community.

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