Estate planning and wealth transfer don't rank that highly in the minds of most people. Maybe because some of us don't want to deal with such unpleasant subjects as death and old age. As a result, this type of planning rarely receives the kind of attention it deserves. But it is worthwhile to pause and think about the way we structure our assets.
Investment returns, although important, may not be the sole objective when investments can be affected by family feuds, for example. One particular story that caught my attention was a high-profile case involving a certain police doctor who is suspected of murder.
Thus far, no smoking guns have been found, but skeletal remains buried in an orchard in Phetchaburi were discovered. The story is still unfolding, but from what I have read in the newspapers, the plot could have come straight out of Hollywood.
What I found most astonishing is not so much the drama involving long-simmering family feuds that finally exploded in a spectacular fashion but how so many families also suffer from similar ''issues'' and never really want to address the problems openly.
More often than not, the epicentre of the feud has to do with money. The usual story line often involves an ageing patriarch with adult children fighting over inheritance. In this particular case, the matriarch is not even dead yet and the sons were already at each other's throats, so just imagine what the fireworks will be like when the old woman finally passes on.
Having a will in place is a good start, but I don't think a will alone is going to cut it in this case. The siblings will likely fight it out in court until the bitter end. In my opinion, a more creative wealth transfer strategy is needed here in the form of a family trust. Although there is no trust law in Thailand, for wealthy families I believe it is worthwhile to set one up offshore.
In planning personal or family investments, it is very important to first decide on the appropriate ownership structure or holding entity. This is especially true for ''family-owned'' businesses. An offshore family trust can be one of the most suitable structures to hold assets and investments as well as a useful estate-planning tool for your family, particularly if you want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death.
Unlike a person, the underlying personal holding company holding the trust assets does not die. So after you die, your heirs have nothing to fight over, because all the assets are already in the trust's name, while management of the trust is done quietly following the instructions and directions in the trust deed, spelling out who gets which assets, how much and when the trust assets are to be transferred upon death.
You can even stipulate how your heirs receive their inheritance upon certain conditions being met such as graduating from college or supporting your surviving spouse. But you may also want to ensure the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies.
Trusts are flexible, varied and complex. Each type has advantages and disadvantages, which you should discuss thoroughly with your financial planner before setting one up. When it comes to cost, a basic trust plan may run anywhere from US$1,600 to $3,000 or possibly more depending on the complexity of the trust. Such a plan should include the trust set-up, a will, a living will and a healthcare proxy.
The hardest part in setting up a trust is to overcome the fear of ''handing'' over your assets and investments to someone else's name. But the real beauty of the trust structure is that although the assets may not be held in your name, you still have control over how the assets are managed.
Moreover, if you set up a revocable trust, you, as settlor, may terminate the trust arrangement at any time during your lifetime. You may also add or remove beneficiaries at your discretion as well as change the percentage of assets that each beneficiary will ultimately receive. As well, you can appoint yourself or someone else as an investment adviser to direct investments in your trust.
Teera Phutrakul, CFP, is chairman of the Thai Financial Planners Association. He may be contacted at firstname.lastname@example.org
About the author
Writer: Teera Phutrakul