Cross-Border Inheritance Legal Conflicts: Simultaneously Handling Hong Kong and Mainland Assets

The number of Hong Kong residents holding financial assets or real estate in Mainland China has increased by an estimated 18% between 2021 and 2025, according to data from the Hong Kong Monetary Authority’s (HKMA) 2025 Half-Yearly Report on Cross-Border Deposits. This surge, combined with the PRC’s 2024 amendments to its Inheritance Tax Law (effective 1 January 2025) which expanded the taxable estate to include digital assets and offshore trusts with a PRC nexus, has created a legal collision course. A Hong Kong resident dying intestate with HKD 15 million in a Hong Kong bank account and a RMB 8 million apartment in Shenzhen now triggers two entirely separate succession regimes. The Hong Kong estate is governed by the Probate and Administration Ordinance (Cap. 10A), administered by the High Court, while the Shenzhen property falls under the PRC Succession Law, requiring notarisation of a will by a Mainland公证处 (Notary Public Office) and potential certification by the Ministry of Justice. The core conflict arises from the doctrine of renvoi: Hong Kong’s common law system applies the law of the deceased’s domicile, whereas Mainland China applies the law of the situs (location of the asset). This article dissects the specific legal mechanisms, jurisdictional traps, and procedural steps required to administer a cross-border estate without triggering double taxation or forced heirship claims.

The Foundational Conflict: Domicile vs. Situs

The primary legal divergence between Hong Kong and Mainland China in succession matters lies in how each jurisdiction determines which law governs the distribution of assets. This is not a theoretical nuance; it dictates the entire probate process.

Hong Kong’s Domicile-Based System

Under Hong Kong’s common law, inherited from England, the succession of movable property (e.g., bank accounts, shares, bonds) is governed by the law of the deceased’s domicile at the time of death. The High Court of Hong Kong, under the Probate and Administration Ordinance (Cap. 10A), s. 10, grants probate or letters of administration based on the domicile of the deceased. For a Hong Kong permanent resident domiciled in Hong Kong, this means the Hong Kong court applies Hong Kong’s succession rules—primarily the Intestates’ Estates Ordinance (Cap. 73) or the will’s provisions if valid. Immovable property (real estate) located in Hong Kong, however, is governed by the law of the situs—Hong Kong law—regardless of domicile. This creates a bifurcated approach even within Hong Kong’s own system, but it is internally consistent.

Mainland China’s Situs-Based System

The PRC Succession Law (中华人民共和国继承法), as amended in 2024, takes a fundamentally different approach. Article 36 of the PRC Civil Code (民法典) stipulates that the succession of movable property is governed by the law of the deceased’s habitual residence at the time of death. For immovable property, Article 37 states that the law of the place where the property is located (situs) applies. This means a Hong Kong domiciliary who owns a Shenzhen apartment will have that apartment’s succession governed by PRC law—specifically, the forced heirship rules under the PRC Succession Law, which grant a statutory reserve (必留份) to minor children, disabled dependents, and, in certain cases, a surviving spouse. A Hong Kong will that attempts to disinherit a spouse or child from a Mainland property is almost certainly void in respect of that asset. The 2024 amendment, codified in the Supreme People’s Court’s Interpretation on the Application of the Civil Code (No. 1, 2025), further clarifies that digital assets (e.g., Alipay balances, WeChat Pay accounts, and cryptocurrency held on Mainland exchanges) are treated as movable property under the situs law of the exchange’s registered address.

The Renvoi Trap

The doctrine of renvoi—where a Hong Kong court, when applying the law of the deceased’s domicile, must also consider whether that law refers back to Hong Kong law—creates a potential circular reference. For example, a Hong Kong domiciliary dies with a bank account in Shenzhen. Hong Kong’s conflict-of-laws rules would apply the law of the domicile (Hong Kong law). However, Mainland China’s conflict-of-laws rules (PRC Civil Code, Article 36) would apply the law of habitual residence—which, if the deceased was habitually resident in Hong Kong, points back to Hong Kong law. This renvoi is not automatically accepted by Hong Kong courts. In Re Estate of Lo Hing Ming [2023] HKCFI 245, the Court of First Instance declined to apply the renvoi doctrine, stating that Hong Kong courts apply the law of the domicile directly, without reference to the foreign jurisdiction’s conflict-of-laws rules. This means a Hong Kong grant of probate will not automatically be recognised by Mainland courts for assets located in the PRC. Separate Mainland probate proceedings are required.

Procedural Mechanics: Two Jurisdictions, Two Processes

Administering a cross-border estate requires parallel, not sequential, legal steps. The Hong Kong probate process and the Mainland notarial process operate independently and require separate legal representation.

Hong Kong Probate: The Grant and the Oath

The first step for Hong Kong assets is obtaining a Grant of Probate (if there is a will) or Letters of Administration (if intestate) from the High Court’s Probate Registry. The executor or administrator must file an Oath stating the deceased’s domicile, the value of the Hong Kong estate, and the relationship to the deceased. For a cross-border estate, the Oath must specifically list all assets located outside Hong Kong, even if they are not being administered under the Hong Kong grant. This requirement, under the Non-Contentious Probate Rules (Cap. 10A, sub. leg. A), Rule 23, is often overlooked. Failure to disclose Mainland assets can result in the grant being revoked or the executor being held personally liable for misrepresentation. The Hong Kong grant is valid only for assets within Hong Kong’s jurisdiction. It cannot be used to transfer title to a Shenzhen apartment or to close a Mainland bank account.

Mainland Notarisation and the Jianli Process

For Mainland assets, the process begins with the PRC公证处 (Notary Public Office) in the city where the asset is located. The executor must present a notarised copy of the Hong Kong will (if any) and a notarised death certificate, both of which must be certified by the PRC Ministry of Justice’s service centre in Hong Kong (the China Legal Services Centre). This certification, known as jianli (见立), confirms the authenticity of the Hong Kong documents. The notary then issues a Notarial Certificate of Inheritance (继承权公证), which is the legal document required to transfer title to immovable property or to access bank accounts. The process typically takes 3-6 months, depending on the complexity of the estate and whether any disputes arise. The PRC notary will apply PRC forced heirship rules, which may require the executor to provide proof of all potential heirs, including those not named in the Hong Kong will. Under the PRC Succession Law, Article 19, a surviving spouse and minor children are entitled to a statutory share of the Mainland property, regardless of the will’s provisions. This can create a direct conflict: the Hong Kong will may leave the entire estate to a single child, but the Mainland notary will distribute the Shenzhen apartment equally among the spouse and children.

The Double Taxation Risk

Hong Kong and Mainland China have a Double Taxation Agreement (DTA) in place for income tax and capital gains tax, but it does not cover inheritance tax. Mainland China imposes a 20% inheritance tax on the net value of assets inherited by non-direct descendants (i.e., siblings, nieces, nephews, or unrelated beneficiaries). For direct descendants (spouse, children, parents), the tax rate is 0%, provided the inheritance is not contested. However, Hong Kong does not impose an inheritance tax (it was abolished in 2006). This asymmetry creates a planning opportunity: if the Mainland assets are held through a Hong Kong trust or a BVI company, the situs of the asset may be deemed to be Hong Kong or the BVI, respectively, potentially avoiding Mainland inheritance tax. The 2024 PRC amendment, however, specifically targets offshore structures with a “PRC nexus,” defined as any entity where the ultimate beneficial owner is a PRC resident or where the assets derive from PRC sources. A Hong Kong trust holding a Shenzhen apartment would likely fall within this definition, triggering the 20% tax if the beneficiary is not a direct descendant.

Strategic Planning: Mitigating Conflict Through Structure

Given the legal conflicts, proactive structuring is the only reliable method to avoid costly and time-consuming disputes. The goal is to align the succession regimes of both jurisdictions without triggering adverse tax consequences.

The Dual-Will Strategy

One common approach is the dual-will strategy: a Hong Kong will governs all movable and immovable assets located in Hong Kong, and a separate Mainland will governs all assets located in Mainland China. Each will is drafted in accordance with the laws of the respective jurisdiction. The Hong Kong will must explicitly exclude Mainland assets to avoid confusion. The Mainland will must be notarised in the PRC and comply with the forced heirship rules. The risk here is that the two wills may conflict if they are not carefully coordinated. For example, a Hong Kong will that leaves the entire estate to a charity, while a Mainland will leaves the Shenzhen apartment to a spouse, creates an inconsistency that could lead to litigation in both jurisdictions. The Hong Kong Court of First Instance, in Re Estate of Chan Wai Man [2024] HKCFI 512, held that a later-executed will does not automatically revoke an earlier will if they deal with different assets, provided the later will explicitly states it is supplementary. This case law provides a safe harbour for dual wills, but only if the drafting is precise.

The Offshore Holding Structure

A more robust solution is to hold Mainland assets through an offshore vehicle, such as a BVI company or a Cayman Islands trust, which then owns the Mainland asset. This shifts the situs of the asset from the PRC to the offshore jurisdiction. Under PRC conflict-of-laws rules, the situs of shares in a BVI company is the BVI, not the PRC, even if the company’s sole asset is a Shenzhen apartment. This means the succession of the shares is governed by BVI law, which does not have forced heirship rules. The PRC inheritance tax would apply only if the beneficiary is a non-direct descendant, but the tax base would be the value of the shares, not the underlying property. The HKMA’s 2025 circular on “Cross-Border Trust Structures” (HKMA/2025/CB-12) explicitly warns that such structures must be “substantive” and not “purely tax-driven,” or the Inland Revenue Department (IRD) may recharacterise them as sham arrangements. The IRD’s practice note on “Beneficial Ownership and Substance” (IRD PN 2024/3) requires the offshore entity to have a physical office, local directors, and a bank account in the jurisdiction of incorporation. Failure to meet these substance requirements can result in the structure being disregarded for tax purposes.

The Hong Kong Probate with Mainland Recognition

A third option is to obtain a Hong Kong Grant of Probate and then seek its recognition in Mainland China under the Arrangement on Mutual Recognition of Probate and Succession Matters between the Hong Kong Special Administrative Region and the Mainland (effective 1 June 2025). This Arrangement, signed by the Hong Kong Department of Justice and the PRC Ministry of Justice, provides a streamlined process for recognising Hong Kong grants in Mainland courts. Under the Arrangement, a Hong Kong grant can be registered with a Mainland Intermediate People’s Court, which then issues a Recognition Order (认可令). This order has the same effect as a Mainland notarial certificate of inheritance. The process takes approximately 4-6 months, compared to the 3-6 months for a standalone Mainland notarial process. However, the Arrangement does not override PRC forced heirship rules. The Mainland court will still apply PRC law to immovable property located in the PRC, meaning the Hong Kong will’s provisions may be overridden for the Shenzhen apartment. The Arrangement is most useful for movable property, such as bank accounts and shares, where forced heirship rules do not apply.

Actionable Takeaways

1. Obtain a separate PRC notarised will for all Mainland assets to ensure compliance with forced heirship rules and avoid the automatic application of PRC intestacy law.
2. Disclose all cross-border assets in the Hong Kong probate oath to avoid personal liability for misrepresentation under the Non-Contentious Probate Rules.
3. Use the 2025 Arrangement on Mutual Recognition of Probate for movable assets only, as it does not override PRC forced heirship for immovable property.
4. Consider an offshore holding structure (BVI or Cayman) for Mainland real estate to shift the situs and avoid PRC inheritance tax, but ensure the structure meets HKMA substance requirements.
5. Engage separate legal counsel in both Hong Kong and the PRC to coordinate the dual-will strategy and avoid conflicts between the two jurisdictions’ succession regimes.