The number of the group with personal assets of more than 1 billion yuan exceeded 4,000 with an average age of 50 years old. They will face the issue of how to transfer their assets to the next generation in about a decade.
At the same time, the Chinese rich have a strong desire for control over their wealth, and hope that the internal members of the family can take charge of the family business. As such, there are inevitably disputes over family issues. This is reflected in the drafting of the Chinese Trust Law. In western countries with common law, trust means that settlor transfers the ownership of the property to the trustee. However, the Chinese trust law definition on the trust particularly emphasized that the settlor entrusts the property to the trustee instead of transferring the ownership of the asset to the trustee.
The Chinese rich, who are reluctant to talk about succession and have a strong desire to control assets, mostly have complex family structures, and to varying degrees, they have overseas identities as well as the different types of assets that are located in different jurisdictions. The following attributes virtually cover every aspect of the features of Chinese rich nowadays: successful people, overseas identity, overseas assets, domestic assets, family structure and complex asset allocations.
In 2007, Mr. Liu died in China due to illness. He left behind a huge sum of money, but the succession plan was unclear. Since Mr. Liu died due to sudden illness, the fact that he didn have a plan of action for this contingency seemed to be in line with the Chinese people's traditional psychological behavior. This tradition has inevitably led to a uproar over the distribution of estates.
In fact, as an artist and businessman living abroad for many years, Mr. Liu property was not only located in China, and he had a large part left in the United States. As for the property located in the United States, Mr. Liu had set up a family trust; therefore there was no dispute over it after his death. However, several real estate assets, equities of several companies, bank deposits and hundreds of pieces of artworks become the focus of the following dispute over the estate. He and his former wife have a son, who obtained a US green card. He also has a child with current wife, and his brothers also play a very important role in the actual operation of enterprises in the Mainland.
In November 2007, as Mr. Liu widow, his current wife Ms. Li filed a lawsuit to a city court concerning the inheritance disputes. She claimed that she signed an agreement with Mr. Liu, his son ex-wife Ms. Wang (Liu Jia), and Mr. Liu brothers and sisters. The agreement stipulated that Ms. Li would get more than 70% of the legacy left by Mr. Liu. However, at the end of September of the same year, Liu Jia suddenly requested that he would have the equal distribution of the legacy with Ms. Li. Thus, she resorted to the court to solve the dispute. At the same time, the elder son of Mr. Liu, Liu Jia, filed a lawsuit in a United States court and the local court found that Liu Jia had the temporary management rights over Mr. Liu heritage. Although Ms. Li and Liu Jia reached a settlement out of court in terms of the litigation, it was already the end of 2008 and the family business and its brands significantly stalled due to the year-long dispute, which seriously affected the normal development of this typical family business. Moreover, there were a lot of uncertainties with regards with the fulfillment of the settlement agreement. Even in 2011, the younger son of Mr. Liu, Liu Yi, had to bring his elder brother to court, as the property transfer had not been performed.
In the traditional Chinese concept of home, eaving the benefits back at home instead of offering them to outsiders is an almost insurmountable bottom line. Therefore, many wealthy people start to ask their children to guarantee their hardearned wealth and family business by signing a prenuptial agreement to protect them from being in the hands of the socalled "outsiders". However, for a person who has a huge family business, the family structure is usually relatively complex. Even if there are so-called utsiders due to the marital relationship, there could a large number of nsiders with blood relationships. How to allocate property among these people is certainly a headache. In fact, regardless of whether the distribution of property involves "outsiders" as described above, tapping the efforts of professionals to manage and plan the family business is a wise choice.However, although Chinese people don seem to care much about protection of privacy in daily life as the westerners do, when it comes to money disputes within the family, it is a taboo to let outsiders get involved. These outsiders also include financial planners and lawyers - but as long as they select the true professionals, these people, as a rational third party, can help objectively and efficiently ensure smooth development of the entire family, and avoid and quell the controversy by adjust property arrangements in a timely manner when there is a change in family members.
For the wealthy people who have huge assets, it not enough to just be aware of the wills in terms of the succession of family business. These individuals cannot only focus on the smooth succession of the estate, and they also realize the longterm prosperity of the family is of utmost importance. This has made preemptive estate planning more necessary. An excellent planning model can help the owner of hard-earned family business strike a balance amongst family members based on his years of business experience and strong commercial sensitivity. Based on the types and scales of the properties, they could be distributed to the future generations with different advantagesand characteristics. Meanwhile , professional wealth managers with preset allocation conditions that could help protect the interests of the relatively weak relative family members and ensure that the property will not be squandered can manage some parts of the assets.Such a clear and comprehensive approach to planning can help avoid inheritance disputes in the future by the largest degree.
Wealth management and estate planning experts need to appreciate and understand the wishes and demands of the property owner. They should have a full understanding of the family structure, family relations and property types, as well as be familiar with a variety of property management structures and related laws and regulations. Nowadays, China's wealthy choose to hire a team of professionals to work out tailor-made wealth management and estate planning programs. The concept has been widely recognized not only because it has been a mature and successful method in the West for a number of years, but also because they e realized that it an inevitable choice to benefit the future generations.
