China's new Civil Code - Part 6: Succession

Background and structure

The Law of Succession in China has so far been governed by the Succession Law. Most of its provisions have been incorporated into Part 6 of the new Civil Code. The Succession Law will cease to apply once the Civil Code enters into force.
 

Part 6 is divided into four chapters: General provisions, legal succession, testamentary succession, legacy and dispositions of the estate.
 

General provisions

The general provisions stipulate, among other things, the scope of inheritance, the commencement of inheritance, the unworthiness to inherit and the priority of a testamentary disposition over the legal succession as well as the rejection of inheritance. Unworthiness to inherit is deemed to exist, among other things, if the heir has caused the death of the decedent, causes the death of other heirs or prevents such heirs from inheriting by force or fraudulent actions.
 

Statutory succession

Unless a deceased person has made a last will and testament, succession is governed by the statutory provisions. According to these, there are 1st order legal heirs (spouses, children, parents) and 2nd order heirs (siblings, grandparents). The heirs of the 1st order are entitled to inherit first, followed by the heirs of the 2nd order. The term "children" includes both children born in or outside wedlock, adopted children and stepchildren. The term “parents” refers not only to biological parents, but also to foster parents, step-parents and adoptive parents.

In principle, legal heirs should inherit in equal shares. However, the Civil Code provides for exceptions to this principle: Heirs who have financial difficulties and are unable to work should receive a larger share of the estate. The same applies to heirs who lived with the deceased and provided and supported him/her. However, heirs who, despite their possibilities, have failed to support the deceased during his or her lifetime should receive a smaller share of the inheritance. In addition, a person who was (financially) dependent on the deceased and who supported the deceased to a large extent (e.g. a brother supported by the deceased who is not a heir) can also receive a share of the estate without being an heir himself.
 

Testamentary succession

A person is in principle entitled to regulate his legacy by a last will and/or testament. However, it should be noted that only a legal heir can be appointed as a testamentary heir. In order for a last will and/or testament to be valid, there are formal requirements for the testator (e.g. ability to make a will, voluntary writing of the will, absence of coercion or threat from other persons) as well as formal requirements (handwritten, signed, dated). If a person is not able to write a will himself, the will may be recorded by another person. Audio or video recordings are also allowed. However, for such a will to be valid, two witnesses must be present when the will is made. Legal heirs and legatees may not be witnesses. In an emergency, an oral will is also possible, provided that two witnesses are present.
 

The Civil Code does not provide for a compulsory portion of the estate for legal heirs (such as the German stipulations on succession). However, a testamentary disposition should provide for a share of the estate for legal heirs who are incapable of working or otherwise unable to earn an income. If the will does not contain any provisions in this regard, it is considered to be partially invalid and the court will award the beneficiary a corresponding share of the estate.
 

Transnational successions

The provisions on succession law in the new Civil Code do not contain any provisions on successions with a foreign connection, in contrast to the succession law and PRC Application Law of Laws to Foreign-related Civil Relations still in force. Under the rules still in force, statutory succession to movable property is governed by the law of the country of the habitual residence or domicile at the time of death of the foreign or Chinese testator, and to immovable property by the law of the country where the property is located.
 

Legal implications

The Law on Succession defined the scope of the estate by enumerating more detailed items. In the new Civil Code this enumeration has been dropped and the estate is generally defined as the testator's property. However, foreign heirs should be aware that there may be estate objects which may be subject to export restrictions and prohibitions.
 

Foreign heirs are in principle treated in the same way as Chinese heirs.
 

In view of the legal provisions on the Law of Succession and the sometimes very vague regulations, there may be a risk that the testator's intentions may not be completely fulfilled despite a will. It may therefore be advisable to make and implement appropriate arrangements while still alive.
 

Heirs are generally liable for unpaid taxes and liabilities of the deceased. In accordance with the Civil Code, this liability of a heir exists only within the limit of the actual value of the inheritance obtained by him/her. Any amount in excess of the actual value of the inheritance may be paid by the heir voluntarily. The heir who disclaims in heritance is not liable for the settlement of the taxes and debts payable by the deceased according to laws.
 

Where both statutory succession and testate succession or legacy exist, the statutory inheritor shall pay of the taxes and debts payable by the deceased. The portion in excess of the actual value of the inheritance of statutory succession shall be borne by the testate inheritor and the legatee pro rata with the inheritance actually acquired.
 

Inheritance cases involving a foreign element have not been regulated in the new Part 6 of the Civil Code. It can be assumed that the existing rules will remain in force with regard to the applicable law concerning the movable and immovable property of a testator, if such property is located in different countries. Nevertheless, especially foreigners with assets in China or Chinese nationals with assets abroad should make appropriate arrangements in the event of death to regulate the estate accordingly.
 

China does not currently levy inheritance tax.
 

In the next and last article of this series we will focus on some aspects of tort liability – the last part - Part 7 of the Civil Code.