China Prenuptial Agreements and Wills Involving Foreign-owned Assets

March 1, 2010 Posted by China Briefing Reading Time: 3 minutes

Mar. 1 – A sad, but inevitable question that occasionally raises its head in China is the position over wills and probate concerning the division of assets within a marriage involving a foreign national and a Chinese national, where one of the spouses dies. In such instances, a China inheritance procedure commences, to determine the scope of the inherited properties.

Scope of inherited properties
The first thing is to decide which properties belong to applicable descendants. Generally speaking, the descendant’s estate is included into the common properties of the spouse and their self-owned properties. In terms of common properties, under the applicable Chinese laws, a spouse may agree in writing that the properties obtained before their marriage and after their marriage are common owned by the spouse, or owned by each respectively. This means that prenuptial agreements are recognized in China.

If there is no such written agreement between spouses, then the relevant Chinese laws provide that the following properties obtained during their marriage period shall be commonly owned:

Salary and bonus
Business revenues
IP revenues
Properties inherited from or donated by a third party (the exception is such properties are specified to be given to only one party by the third party)
Other properties that are commonly owned

In terms of self-owned properties, the relevant Chinese laws also provide that the followings shall be deemed as the properties of one party:

The properties belong to one party who obtained them before the marriage
Properties that are medical fees, or subsidy allowances for disabled charges etc, incurred from body injury of one party
Properties are deemed as one party as specifically provided in a will or the bequeathed
All other properties are deemed to belong to one party

Partition of inheritance
According to the relevant Chinese laws, when partitioning the descendant’s estate, as for the common owned properties obtained during the marriage period, half of it shall be allocated as the properties of the decedent’s spouse unless otherwise provided in writing. In other words, the descendant’s self owned properties, and half of the common owned propertied obtained during the marriage period shall be their owned inheritance, if the descendant does not make their will regarding how to deal with their owned properties, then their inheritance shall be inherited in a preferential order as following:

Spouse, children, and parents
Sisters and grandmothers and grandfathers

Foreign inheritance
Under the relevant Chinese laws, foreign inheritance is provided for under the following circumstances:

If a Chinese citizen is going to inherit the descendant’s properties outside of China or inherit a foreigner’s properties within the territory of China, then, where the inheritance are movable properties, the law of the decedent’s domicile shall apply; in case the inheritance are non-movable properties such as real estate, then the laws where such non-movable properties are located shall apply.

If a foreigner is going to inherit the descendant’s properties within the territory of China or to inherit another Chinese citizen’s properties outside of China , should the inheritance be movable properties, the law of the descendant’s domicile shall apply; in cases where the inheritance includes non-movable properties such as real estate, then the laws where such non-movable properties are located shall apply.

Wills

It is possible for a foreigner to write a will in China to decide assets distribution upon death
The will shall be written in Chinese
The will should be notarized for legal clarification.

Richard Hoffmann and Lily Gao are part of the business advisory services team at Dezan Shira & Associates in Beijing and can assist with matters related to foreign direct investment and personal matters while living in China. They may be contacted at beijing@dezshira.com.