What is ‘fair’? Amongst siblings, the answer to this question is highly subjective and almost universally fraught with historical angst. So how can you minimize conflict and be as even-handed as possible through the process of wealth transfer? Estate equalization can help; it’s an elegant and simple solution to a complex challenge.


We speak to Katie Graves, a partner in the private client and tax team of Withersworldwide in Hong Kong to navigate the delicate challenge of estate equalization and show you how two different families are finding their unique answer to ‘fair’.



In this issue:

Fair?: The delicate challenge of estate equalization

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Case study: Bespoke and stable

Case study: Fair, Equitable and Safe


Fair?: The delicate challenge of estate equalization

The notion of ‘fairness’ begins developing in children as young as four. Depending on the number of siblings and personalities involved, much time can be spent adjudicating by parents. 


It’s one thing, however, to settle an argument about the size of cake slices and entirely another to resolve intense disputes over inheritance. If not effectively managed, the adjudication can end in the sphere of law courts. 


While fairness might be almost entirely subjective, estate equalization can be an excellent strategy if you are aiming to divide your assets evenly amongst your beneficiaries. When done well, it promotes lasting family harmony and helps avoid court time. ii 


To explore the subject of estate equalization in the context of wealth transfer, we speak to Katie Graves, a partner in the private client and tax team of Withersworldwide in Hong Kong. iii


The following are edited excerpts from our conversation. 


Key considerations in wealth transfer strategies 


Planning is crucial 


Irrespective of the size of your wealth, if you die without a will, what happens to your estate will be determined by the relevant intestacy rules. Unfortunately, the intestacy rules are unlikely to completely align with your wishes; for example, your children will typically receive their share of your assets at age 18 – the time when the law recognizes them as adults.

Estate equalization is the strategic process of ensuring fair and commensurate passing of family wealth to the next generation. 


It involves careful advance planning by the business owner / parent with the aim of equitably transferring assets amongst the beneficiaries. E.g., The family business is bequeathed to one child and ‘an asset of equivalent value’ is bequeathed to the other(s). 


Life insurance is an elegant and practical solution to provide an ‘asset of equivalent value’. E.g., The business owner (parent) is insured to a value equivalent (or multiple equivalents) to that of their business. 


Upon their demise, the insurance policy is realised and bequeathed to one child while the business is kept undivided and passed, in its entirety, to the other.  

In Hong Kong, individuals have complete testamentary freedom – the right to leave property to whoever you choose – so a will is a powerful document in communicating your wishes. 


Planning gives you control over the future of your assets


To ensure the right person, receives the right assets, at the right time, and in the right place, you need to plan. Planning and utilizing structures such as trusts will also enable you to ring-fence assets preserving them – intact – for future generations. 


Planning takes time


The greater your wealth, the greater the complexity in your world, and that complexity takes time to navigate. You need time to reflect on and fully consider the extent of your assets, liabilities, the potential consequences of your actions, and most importantly, the needs of your beneficiaries. Time, to have the potentially difficult conversations you need to have, is also critical – the fewer surprises there are, the less likely there will be challenges in the future.  


Disinheriting family and dependents


Whilst there is testamentary freedom in Hong Kong, the Hong Kong’s Inheritance Ordinance prevents you from disinheriting your family members and dependents in some circumstances. Therefore, if it is your intention, it is important to explain why you have not made provision for a particular individual under your will to discourage challenges to your will. 


Your family members and dependents might be able to make a claim against your estate if they can show:


  • That immediately before your death, they were being maintained by you; and
  • That you failed to leave adequate provision for him or her

For example, in a recent case, a mistress was able to claim against the estate of the deceased where she was able to prove that the deceased had provided financial support to her for over 20 years, including providing her with an apartment to live in, a car, and a monthly allowance. On the other hand, adult children who can support themselves may find it more difficult to make a claim under the Hong Kong’s Inheritance Ordinance.


Tax efficiency 


It’s crucial to fully understand your/ your beneficiaries’ tax exposure when planning wealth transfer, particularly if your assets are in multiple locations.  Whilst there is no estate tax in Hong Kong, assets in other locations might be subject to tax following your death.* E.g., if you own a property in the UK, your estate will have exposure to UK inheritance tax even if you and all your beneficiaries are domiciled in Hong Kong. 


Some popular structures used to facilitate wealth transfer

  • Trusts – popularly used to hold assets for a common group
  • Foundations – Legally different to trusts, but conceptually the same for beneficiaries
  • Shareholders’ agreements 
  • Deeds of family agreements 
  • Life insurance solutions
  • Combinations of the above


iii Katie Graves advises on a range of wealth planning matters affecting high net worth individuals and their families, including international succession planning, trust and tax matters, as well as on cross-border inheritance issues. She also assists individuals in relation to multi-jurisdictional estate planning with single or multiple wills, to make sure they reflect their particular needs and objectives.  


We spoke to Katie on 12th May 2021. This edited excerpt reflects her views and available data on that date [from Hong Kong’s perspective. This article is general in nature and not intended as advice; it might not be appropriate to you.

i https://www.nature.com/articles/nature15703

ii To see how family constitutions can also help to create lasting family harmony, please see: https://www.mercer.com/pcs/insights/issue-3-pcs-vision.html

* Clients should consult their tax advisors. This article is not intended as advice. 

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Mature Chinese businessman holding smartphone in office

Case study: Bespoke and stable


The tailored savings plan at the center of an entrepreneur’s legacy planning




Our client is a successful entrepreneur in his late 40s. His personal wealth is over US$30 million, and he has several investment vehicles with vastly different maturity dates and risk profiles. His three school-aged children live abroad. 


Our client is looking for: 


  • A financial instrument with stable returns that maintains, or grows, his wealth
  • A tailored product that offers a guaranteed breakeven point  
  • A solution that enables legacy planning 
  • Maintaining a separate asset pool for each of the three children




  • The client wants a bespoke solution and prefers to work with people and organisations that can clearly demonstrate deep understanding of his unique needs
  • The client likes to be fully informed, which includes seeing various return projections under different interest rates
  • Used to a fast pace of working, the entrepreneur asked for a quick turnaround on a thorough solution




  • A savings plan with a capital breakeven at seven years 
  • Advised the client to set up a trust in order to facilitate his legacy planning
  • After inception, the policy transferred to the client’s trust. The trust will distribute the proceeds evenly among the three children at the appropriate time
  • US$3 premium paid as a lump sum
  • Twenty-four-hour turnaround from initial client meeting to solution delivery


Key takeaways


  1. Savings plans are highly versatile financial instruments that can guarantee capital as well as facilitate legacy planning and wealth transfer  
  2. PCS by Mercer works closely with a client’s private banker to understand everything about the client’s needs, including risk appetite, time horizon, financial and family situations and ideal outcome
  3. We compare wide-ranging products and stress test solutions, so our clients can access all the data they need to make the right decisions



Karol Luo

Assistant Vice President

Private Client Services by Mercer Limited

E: karol.luo@mercerpcs.com

Case study: Fair, Equitable and Safe

We helped our client evenly distribute his wealth to two generations while safeguarding his wishes and the business.




Our client is a high net worth male, who has three children and three grandchildren. From humble beginnings, our client has built an empire. Only one of his children is involved in the family business, the other two are following their own passions. 


Our client wants: 


  • To ensure his three children are given an equal distribution from his estate; 
  • To leave a legacy for his grandchildren that cannot be changed or used by their parents; 
  • While keeping his business assets and personal assets segregated and secure


The family was seeking a solution that helps legacy planning while ensuring estate equalization through the process of generational wealth transfer.




  • Client’s health was not ideal. Some of his medical test results were outside optimal levels, which increased the premium for the life protection products offered to him
  • Received competitive offers from other life insurance providers/ brokers
  • Client was price sensitive




  • Life Insurance policy with the client himself as the insured with US$50 million coverage and the two children, who were not part of his business, as the beneficiaries
  • The policy solution was an Indexed Universal Life policy as the premium was approximately 20% more economical than a Universal Life Policy
  • The business, in its entirety, was left to the child who was already running it
  • In order to facilitate the substantial legacy he wanted to leave his grandchildren, PCS by Mercer suggested additional policies for the client’s three children as the insured. The three policies also had the benefit of being more cost-effective 
  • The client set up a trust to own the additional policies with himself as the settlor, and all three grandchildren as beneficiaries


Key takeaways


  1. Life Insurance policies can ensure family wealth is preserved and evenly distributed to more than one generation
  2. The formation of a trust guaranteed that only the client’s instructions would apply to the three policies that were set up for the grandchildren’s future prosperity
  3. Above all else, PCS by Mercer solutions are client-led. Before tailoring products, we always work to understand our clients’ specific needs and evaluate the entire spectrum of challenges they might face. Our comprehensive processes work to provide the best, most suitable and most economical solutions for our clients




Kunal Bhargava

Vice President

Private Client Services by Mercer Pte. Ltd.

E: Kunal.Bhargava@mercerpcs.com