Where there's a will there's a happier heir

DEATH is never an easy subject, which explains why in Hong Kong - like everywhere else - few people draw up wills and most relatives must wait years before estates are settled.

In fact, only one in 10 people in Hong Kong writes a will, compared with three out of 10 in Britain and one in four in the United States.

'There's still the belief among the older Chinese generation that making a will . . . means you're going to die,' a solicitor at a British law firm said.

But where there is a will, there is less confusion. A will not only prevents a delay of up to four years while a court-appointed administrator handles the estate, but it also ensures your money goes to your beneficiaries of choice.

'A will provides clarity, makes people . . . carry out the wishes of the person concerned, whether it's to the family or to the RSPCA [Royal Society for the Prevention of Cruelty to Animals],' said James Clemence, manager of Coopers & Lybrand's tax division.

'Without a will, the deceased's assets are distributed according to intestate tax regulations,' Mr Clemence added.

In general, the laws of intestacy give the spouse half the assets and divides the rest among the children - who, if they are minors, could see their inheritance tied up for a while, often making it difficult for the surviving parent to make ends meet.

Drawing up a will is not expensive or legally arduous. But it does require a thorough net-worth review. That means calculating the value of everything - your home, your possessions, savings and possible life-insurance payouts.

Then it can be as simple as filling in a form, naming an executor and signing the will in the presence of two witnesses. Pre-printed forms are easy to obtain and the executor can be a friend appointed to carry out the will's instructions.

No law says wills have to be drawn up or witnessed by solicitors - in fact, a 1995 amendment to the Wills Ordinance makes some hand-made wills acceptable in court. However, it is well known that a lawyer can make more money fixing a botched-up home-made will than drawing up a fresh one.

For instance, the mere imprint of a paper clip could invalidate a will, as the court wonders whether it once held an amendment or was just attached to a phone bill.

In the end, the best help, though hardly the cheapest, is professional. In Hong Kong, hiring a solicitor to draw up a will can cost anywhere from $2,500 to $3,000. In the US, US$500 is the common charge, although some legal chains charge only $70 for simple estates. Solicitors in Britain charge from GBP30 (about HK$365) to GBP100.

As Benjamin Franklin said, death and taxes are the only certainties. You cannot avoid the first, but a will allows you to control the second.

In Hong Kong, for instance, if the principal value of an asset located in or controlled from the territory is from $6.5 million to $8 million - not difficult here because of the premium value on property - estate duty is charged at 6 per cent. Estates worth $8 million to $9.5 million face a 12 per cent duty, while those exceeding $9.5 million are slapped with an 18 per cent tax. With a little bit of estate planning, much of this can be avoided.

For example, when divided into separate gifts valued at $200,000 or less, the estate can be given tax-free to those intended to inherit it. Or assets can be moved abroad. But most people find a discretionary trust, in which assets might be held until a child reaches maturity, the best way to avoid the tax man.

'The Chinese have traditionally been superstitious, preferring not to plan their estates,' said Yvonne Law Shing Mo-han, a partner at Deloitte Touche Tohmatsu.

Sometimes, as when taxes have been dodged, heirs can find themselves better-off without the inheritance.

Careful estate planning is crucial for British and US domiciles living in Hong Kong. A British or American citizen with property here would be subject to tax both in Hong Kong and at home.

That is tough enough for British domiciles, who face a maximum estate duty of 40 per cent, but their US counterparts face an even-harsher penalty of up to 55 per cent.