- Hong Kong follows a separate property system between spouses. Normally, property registered in the husband’s name belongs to the husband and property registered in the wife’s name belongs to the wife, unless there is evidence to the contrary.
- A policy bought before marriage and fully paid up is generally treated as personal property and does not have to be divided, even on divorce.
- A policy where one spouse’s parent is the policyholder and the child is the insured is generally treated as the parent’s separate gift to the child, and is not included in the division.
- In a Shenyang case, the court held that a policy the husband bought for the child could not be divided as the couple’s joint property.
As insurance becomes more common in Hong Kong, disputes over it are also increasing, for example over division of property on divorce and enforcement of debts. What position do the Mainland and Hong Kong legal bodies take?
Because of Hong Kong’s distinct legal environment, divorce insurance and policies there offer a route to asset protection worth considering.
The Mainland marital property system explained
Under the Civil Code of the People’s Republic of China, the Mainland clearly defines a couple’s joint property and personal property.
A couple’s joint property is owned by both and each has an equal right to deal with it. It includes what is earned during the marriage:
- Wages, bonuses and payment for work
- Proceeds from production, business and investment
- Proceeds from intellectual property rights
- Some inherited or gifted property, and so on
Personal property includes:
- One spouse’s property from before the marriage
- Compensation received for personal injury
- Property that a will or gift contract says belongs to one spouse only
- Daily-life items used only by one spouse, and so on
Many people try to keep pre-marital assets or property their parents gave them in a separate bank account, to show it is personal property.
Please note
- Once money moves in and out of the account, it can easily be found to be joint property, so the funds become mixed
- Low bank interest rates cannot keep up with inflation, so wealth built up before marriage keeps losing value
By comparison, protecting pre-marital wealth and family assets through a Hong Kong policy offers a more effective solution.
Will pre-marital property be treated as joint property?
Feel free to check your situation with us.
The distinctive advantages of Hong Kong divorce insurance
The special advantage of a Hong Kong policy in protecting marital property comes mainly from Hong Kong’s separate property system, inherited from English common law, which gives great respect to personal property rights.
Unlike the Mainland’s joint property system for spouses, Hong Kong does not distinguish pre-marital from post-marital property, and has no concept of a couple’s joint property after marriage.
Normally, property registered in the husband’s name belongs to the husband and property registered in the wife’s name belongs to the wife, unless there is evidence to the contrary.
Under Hong Kong’s Married Persons Status Ordinance (Cap. 182), even during the marriage each spouse manages and disposes of their own property, and property and debts stay separate.
Beyond the property system, a Hong Kong policy also has strong indivisibility, as the policy terms state clearly:
- The policyholder is the only person entitled to exercise any right or benefit the policy provides
- Anyone who is not a party to the policy (including but not limited to the insured or a beneficiary) has no right to enforce any term of the policy
This means that under Hong Kong law the policyholder is the sole holder of the policy, and even a body such as a court cannot enforce any of its terms.
For people who want to protect their personal property, a Hong Kong policy offers a relatively safe legal option for protecting assets.
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How Hong Kong divorce insurance policies are divided
Dividing property that includes a Hong Kong policy differs according to the situation:
- A policy bought before marriage and fully paid up: generally treated as personal property and not divided, even on divorce
- A policy taken out during the marriage: unless otherwise agreed, it is mostly treated as joint property, including the benefits the policy generates
- A policy where one spouse’s parent is the policyholder and the child is the insured: generally treated as the parent’s separate gift to the child, and not included in the division even if the marriage breaks down
Real control of the policy is in the policyholder’s (the parent’s) hands, and when money is withdrawn it goes straight into the parent’s account. This further ensures the policy’s assets are not divided.
Cross-generation cover: strengthening protection of marital assets
Hong Kong insurance also offers cross-generation cover, sometimes called skip-generation cover, where parents can take out a policy directly for their grandchildren. Under this arrangement:
- The grandparents, as policyholders, have absolute control of the policy for as long as they are alive
- The insured or beneficiary can be named as their own child or grandchild
This strategy is more effective at ring-fencing your children from marital property risk, and it also allows family wealth to pass on in an orderly way.
The strong protection of Hong Kong’s legal system
- Hong Kong follows the common law system, whose legal system gives great weight to protecting private property, so private property holds an unshakeable position in Hong Kong
- Hong Kong has the Personal Data (Privacy) Ordinance (Cap. 486). Anyone found to have broken the rules, invaded another person’s privacy or leaked personal information can be fined up to HK$50,000 and may face 2 years in prison
- The Office of the Privacy Commissioner for Personal Data in Hong Kong is the only body in Asia devoted to protecting personal information privacy, and since it was set up in 1996 it has overseen the enforcement of the Personal Data (Privacy) Ordinance
Divorce insurance as a strategic choice
With its distinct legal environment and protections, a Hong Kong divorce policy is an effective option for people who want to protect personal property and family wealth.
Please note
- Any asset protection strategy should stay within the legal framework and avoid anything unlawful or designed to evade the law
- When drawing up an asset protection plan, seek guidance from professional legal and financial advisers, to make sure the strategy is lawful and works
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Will a policy be included in the division?
Get in touch, and a dedicated consultant will first understand your situation.
Divorce insurance: the role of Hong Kong policies in dividing property
In Hong Kong, insurance products are often seen as an asset that can ring-fence marital risk, because they are private and work across borders.
- A Hong Kong policy bought before marriage: if all the premiums were paid before the marriage, it is generally treated as personal property, and under the law personal property from before the marriage does not have to be divided on divorce
- A policy a parent buys for a child: the parent is the policyholder and the child is the insured. It is generally treated as the parent’s personal gift to the child, and control of the policy stays with the parent, so it is not included in the division of property on divorce
How a policy bought after marriage is divided
A policy bought after marriage is far more complicated. If the spouse does not know the policy exists, or even knows but is not sure which insurer it is with, the policy is very hard to divide.
Hong Kong insurance protects personal privacy very strictly, and an insurer will not disclose customer information without the policyholder’s consent.
If a spouse can provide enough evidence that the policy was bought with joint property, the division process will be very complicated and long.
Strategic planning with divorce insurance
For people worried about marital risk in future, buying Hong Kong insurance before marriage can effectively avoid disputes over dividing property later.
However, everyone’s situation is different. Before you take out a policy, it is best to consult a professional insurance adviser, to make sure the cover meets your needs and financial goals.
A Hong Kong policy in Mainland divorce property: a case worth thinking about
Some people say Hong Kong insurance can avoid debt and tax, and even protect your assets from division on divorce. But a Shenyang court judgment at the end of 2022 shows us what actually happens.
The case from start to finish: a policy for a child
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June 2016
The couple had divorced before, then got back together and married again
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March 2017
The husband used a Hong Kong account to buy an AIA policy in Hong Kong for their child, worth as much as US$1.8 million
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Two months later
The couple signed a property agreement dividing their company shares, restaurant and other property
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January 2018
The wife applied for divorce again and the court granted it. When the property was divided she found the policy, and asked for it to be divided as joint property too
The policy was a little unusual: although the husband was the policyholder, the insured was their child. The policy stated that when the child turned 18, ownership would pass automatically to the child.
In other words, the husband was only holding the policy for the child for the time being, and the final beneficiary was the child.
What did the court say?
The court’s position was clear: this policy could not be divided as the couple’s joint property:
- The judge held that although the husband controlled the policy for now, the final beneficiary was their child, and dividing the policy now would harm the child’s interests
- The husband bought the policy with his own money, which was separate from the wife’s property
- In law, the husband’s act amounted to a gift to the child, not joint property of the couple
The appeal court also upheld the judgment, stressing the importance of protecting the interests of minors.
The court did, however, remind the wife that if there is later evidence that the husband actually took or used the insurance money, she can apply again.
What is the real concern?
- The wife’s worry is reasonable: could the husband use this policy to move property that should have been the couple’s joint property?
- Until the child turns 18, the husband, as policyholder, has many rights, including surrendering the policy or changing the beneficiary
- If the husband’s real intention was to avoid the division of property, this could indeed be unfair to the wife
- But in this case the court gave more weight to the child’s long-term interests, and held that even if there is a risk, the child’s future protection should not be sacrificed
What this means for us
A court weighs many factors, especially where minor children are involved. If you are thinking of using Hong Kong insurance to plan your property, here are a few suggestions:
- Be honest: rather than trying to hide assets, plan the family finances openly
- Decide together: when a married person buys an important insurance product, it is best that the spouse knows and agrees
- Be clear about the purpose: if a policy really is meant for the children, it is best to make that plain in how it is set up
- Seek advice: before an important financial decision, it is always good to hear what professionals think
Hong Kong insurance still has its advantages
Hong Kong insurance is not a cure-all for avoiding the division of marital property, but it still has distinct advantages in other ways, such as a wide choice of investments and broad cover.
Whatever financial product you choose, it should be based on real needs and long-term planning, not on avoiding some risk in the short term.
Whether you are planning for yourself or for your children, honesty and transparency are always the best strategy.
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Does the policyholder’s control affect the division?
If in doubt, feel free to contact our dedicated consultants.
Frequently asked questions about dividing Hong Kong divorce insurance policies
Is a Hong Kong policy bought after marriage treated as joint property?
A policy bought after marriage is treated as joint property in most cases, but it depends on the circumstances and the source of the funds.
Does the policyholder’s control after marriage affect the division?
If the policyholder has control after marriage and the money came from joint property, the policy may be required to be included in the division.
On divorce, is a Hong Kong policy that is not fully paid up joint property?
If the policy is not yet fully paid and the premiums came from income earned after marriage, it may be treated as part of the couple’s joint property.
Can a spouse ask to see the other spouse’s Hong Kong policy information?
Hong Kong insurers protect policyholders’ privacy. A spouse cannot look up policy information directly without the holder’s consent, but the court can step in to investigate.
After divorce, how do you stop a policy becoming a division dispute?
Buying the policy before marriage and paying all the premiums, or planning sensibly, for example by naming the children as beneficiaries, can effectively avoid a dispute over division.
Is it lawful to use a Hong Kong policy to protect property?
Using a Hong Kong policy sensibly for property planning is lawful, but you must avoid deliberately hiding assets, so as not to break the law.
