Legacies shrink as economy gets weaker
Updated: 2013-12-24 09:24
By Gao Changxin in Shanghai (China Daily)
Faced with a harsh economic reality, Chinese parents are less willing and have fewer assets to pass down to their children than their foreign peers, according to a survey published on Monday.
The survey by HSBC Life Insurance Co Ltd, which polled more than 16,000 people in 15 countries and territories worldwide, found out that nearly three in five, or 59 percent, Chinese retirees expect to leave an inheritance of at least 418,000 yuan ($68,800) to their offspring.
That compares with a global average of 69 percent, with an average bequest of $148,200.
Not only that, but what is inherited in China might be even less as Beijing could soon start levying an estate tax.
Li Quan, 57, of Shanghai, retired three years ago. He said he wants to leave his family with something, but he is not sure whether there will be much to pass along. He is trying to make his son's life easier by helping to pay his mortgage and holding weekly family dinners along with his retired wife.
"I can leave my apartment to my son, for sure, but that's pretty much it. I need cash for hospital bills and money for my wife and I to live on," Li said.
He added that he has never heard of parents who don't want to pass down their wealth to their children; it's just that they often have little to give.
According to HSBC, only 3 percent of non-retirees in China had received an inheritance. Inheritances often are used to fund retirement: Of the non-retirees expecting to receive an inheritance, 81 percent said it would at least partly fund their retirement, with 14 percent hoping it would completely cover their expenses.
The median inheritance expected by working-age people is 287,100 yuan, which is about half the amount that retirees are expecting to leave.
"The findings show that a high percentage of global parents, including the Chinese, expect to leave an inheritance to their children," said Jim Costello, HSBC Life's CEO designate.
"However, other needs over the course of one's life, such as paying for children's education and preparing for family medical care, may hinder long-term savings," he said.
He advises parents to integrate legacy planning into their overall financial planning to secure their children an inheritance.
Such planning may have to incorporate a new tax.
The Ministry of Finance first released an inheritance tax draft in 2004 and revised it in 2010 but nothing came of it.
The tax, however, regained traction this year following reports that a preliminary tax proposal was brought up at the Third Plenum of the 18th Central Committee of the Chinese Communist Party in November.
According to the latest draft, the inheritance tax will kick in at 800,000 yuan, with net successions of 5 million, 10 million, and 30 million yuan subject to tax amounts of 840,000 yuan, 2.09 million yuan and 10.34 million yuan, respectively, according to local media reports.