How to provide long term financial support for Thais – estate planning

[Bubbha]

I would like to leave part of my assets to one or more Thai nationals who have very limited current income and future earnings potential. My goal is to provide long term income and financial security to these individuals.

 

Given the cultural norm and practice of sharing, an inheritance of cash would not last long – and might even be more harmful than helpful - in some ways.

 

Purchase of a lifetime, or at least long term, annuity would be ideal, but annuities do not seem to be available in Thailand.

 

How have others managed this situation? I have thought about property and land (e.g. less liquid) but my concern is that these assets would not last much longer than cash in hand.

 

Thanks for any thoughts and suggestions.

[smutcakes]

I went through this recently and looked into setting up trust funds etc to ensure that funds were properly managed and a regular income was provided and it was only under special circumstances that capital could be used which would need approval from the trust administrator. I was told that they don't have this service in Thailand yet. It seems the safest would be leased assets generating income, or dividends from shares- both of those have pitfalls but are obviously better than cash.

 

At the moment i am still going down the route of trying to educating them on living on income generated and the negative affect of income generated on blowing all the capital on worthless rubbish.

 

 

[Kwasaki]

I would guess this is the wrong forum, I do not intent to do what you want to do but I understand what your trying to do.

I'm no expert, if I wanted to do this I would set it up in my own country and have monthly amounts sent to the people in question Thai bank accounts.

Edited July 19, 2018 by Kwasaki

[scorecard]

A few years back I did a lot of research on this  and at already mentioned I found that Thai banks etc., offer very few products.

 

However I found  a company called Tokio Marine. It's from Japan bur operates in many countries. Highest rated company in this industry in Japan and in Japan banks and insurance, pension, mutual funds are monitored daily by a government watchdog. The marine part is pretty much historical, today they focus on pension plans. annuities, endowment plans, health insurance, personal accident and maybe more, plus general insurance (house, vehicles) etc.

 

Just one example I took a pension plan for my adult son, I pay annually for 15 years then it's dormant (growth period) for many years then payouts start at 65. Lots of flexibility available.

 

They have a very big office in Empire Tower on Sth. Sathorn Rd in Bkk and some regional offices, in Bkk and Chiang Mai plenty of English available. no push they take their time to ensure the potential customer fully understand, always very pleasant.

 

Maybe worth a look. 

 

 Good luck.

 

[kingstonkid]

I set up a money market account offshore that will provide her with money or she can keep it invested.

[Spaniel]

Are you from the USA?      If so go to the Vanguard website (www.vanguard.com)  and check out the annuities they offer.      I invested in a annuity with them many years ago and it has done quite well.     My (Thai) wife is named as the beneificary  but I have a couple options to either annutize  now and start drawing income ( I am 74 wife 58) but what I will probably do is just leave it all to her and let her take a monthly income.

[1FinickyOne]

Some interesting suggestions but always the human element involved... my wife is not an educated or sophisticated investor and yet she has done great keeping the money in the small sphere of investments that she can understand. Farmland has appreciated tremendously. Gold somewhat - and cash in the bank. 

 

My larger concern is that she just lets it grow and does not enjoy it as well. Always something. 

[Lacessit]

One way to do it would be buy a condo in her name or yours as an investment, and she gets the rental income.

[Gold Star]

'Never be worth more dead here than alive!' I was warned... 

I have so far heeded that advice, but yet as time goes on, I am facing the same desire to properly protect my spouse financially in the case of my demise with some kind of financial net, both without interfering with my current investments, or making it common knowledge to all. 

Her family is the worst imaginable nightmare collection of cheaters, liars, swindlers, and even a murderer, that have taken everything from her that she has ever had all her life by guilting her into giving it to them, or coming up with some scheme.  She even bought her parent's house twice, once to buy the land and build it, and then again to get it out of debt as they leveraged loans on it once it was completed and they were going to lose it for non payment.

Being aware of this history, I have never given them a single baht, and they are constantly trying to get her to ditch me and meet someone else that would make a better mark to milk.

Normally, purchasing life insurance would be the solution, but I am certain it would result in my untimely death soon thereafter, and the resulting windfall from the 'accident' would vanish just as quickly. 

[smotherb]

9 hours ago, Kwasaki said:

I would guess this is the wrong forum, I do not intent to do what you want to do but I understand what your trying to do.

I'm no expert, if I wanted to do this I would set it up in my own country and have monthly amounts sent to the people in question Thai bank accounts.

Before he died, a friend in the Philippines set up two trusts--one for his daughter in the States and one for his girlfriend in the PI. They were allowed to make monthly withdrawals of specific amounts until their trust was depleted. 

[James2020]

All of my assets are in the US, with Vanguard.  It simplifies things a lot, and the older we get, simple is better.  A trust will be set up for my wife when I die.  I did this with a US based attorney.  The trust (which is in the US) will make monthly payments to her, and the payments will be sent to Thailand, or wherever she is at the time.  Vanguard will be the trustee for only 0.55% of the assets in the trust, which is less than most banks, etc, will charge.  I need to use Vanguard's funds though for the trust, which I do anyway.  Thailand does not recognize trusts, and besides, I do not want to have my assets in Thailand.  My wife will be able to do what she wants with the monthly payments, but in your case, it could be controlled even more if you wish.

[kannot]

16 hours ago, Kwasaki said:

I would guess this is the wrong forum, I do not intent to do what you want to do but I understand what your trying to do.

I'm no expert, if I wanted to do this I would set it up in my own country and have monthly amounts sent to the people in question Thai bank accounts.

I was thinking exactly the same, cant trust anyone or thing in Thailand

[Ryan CUllinan]

All of my assets are in the US, with Vanguard.  It simplifies things a lot, and the older we get, simple is better.  A trust will be set up for my wife when I die.  I did this with a US based attorney.  The trust (which is in the US) will make monthly payments to her, and the payments will be sent to Thailand, or wherever she is at the time.  Vanguard will be the trustee for only 0.55% of the assets in the trust, which is less than most banks, etc, will charge.  I need to use Vanguard's funds though for the trust, which I do anyway.  Thailand does not recognize trusts, and besides, I do not want to have my assets in Thailand.  My wife will be able to do what she wants with the monthly payments, but in your case, it could be controlled even more if you wish.

That's a good structure. However have you worked out your tax position vs. Those charges over a long period?

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[Ryan CUllinan]

Set up a portfolio bond that is "capital redemption" and not "life assured". Then have it structured as a beneficiary trust. Have that pay out in the manner you wish and have it all placed in your final will and testament by a lawyer.
Im actually writing an article on exactly this. Ive already written this one if it's of interest.

https://www.comparereturn.com/publications/are-you-prepared-to-die-in-thailand


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[NancyL]

If the Thai people you want to help pay Thai income tax, you may wish to consider making contributions on their behalf to a "provident fund" or "long term equity fund".  These funds, usually mutual funds, are available through Thai banks, like Bangkok Bank.  In both cases, the Thai tax payer can contributed up to 15% of their pre-tax earnings,  (30% total if I read the tax code correctly) into these funds and when they reach a certain age, they are able to withdraw from these investment funds.  Sort of like a U.S. IRA or 401K account.  But, in Thailand (at this time) withdrawals from these accounts aren't taxable.  

 

http://www.rd.go.th/publish/6045.0.html

 

In the U.S., I remember our financial adviser telling Hubby and I back when we were in our early 30s and working for a Fortune 100 company that the first thing we should do to save for our retirement is to put all the money we could into the 401K plan offered by our employer (they matched contributions), buy all the company stock we could through the company plan (sold to employees at a discount) and then, and only then, consider more exotic ways of saving for our retirement.  It was good advice.  In other words, do the most logical and safe way to save first.  In Thailand, that's the ability to stash pre-tax earnings into retirement savings accounts.

[NancyL]

If you're going to have any money in the U.S. that is intended for the benefit of a Thai person, i.e. they will claim it after your death, do them a big favor and help them to apply for an ITIN (individual taxpayer identification number) now, while you're still around to help them.

 

They will have to file with Uncle Sam to get the money out of the U.S. and the ITIN is the 9-digit number that people who aren't eligible for a Social Security number use in place of one for the IRS.  Investment firms and banks won't release funds until someone produces either a SSN or ITIN.

 

How to get an ITIN?  Dr. Google is your friend. 

[Ryan CUllinan]

If you're going to have any money in the U.S. that is intended for the benefit of a Thai person, i.e. they will claim it after your death, do them a big favor and help them to apply for an ITIN (individual taxpayer identification number) now, while you're still around to help them.
 
They will have to file with Uncle Sam to get the money out of the U.S. and the ITIN is the 9-digit number that people who aren't eligible for a Social Security number use in place of one for the IRS.  Investment firms and banks won't release funds until someone produces either a SSN or ITIN.
 
How to get an ITIN?  Dr. Google is your friend. 

Thomas Carden can do it Nancy?
Susan is over from the US and she is one of the few people here in Thailand that is registered to sign off on ITIN numbers. Otherwise you're looking at a 6 month + wait


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[James2020]

1 hour ago, Ryan CUllinan said:

That's a good structure. However have you worked out your tax position vs. Those charges over a long period?

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My wife is a dual citizen (Thailand and the US), so she will pay US income tax on the proceeds of the trust.  The Vanguard fee is just the cost of doing business.  Other ways to do this (i.e. life insurance) have hidden fees, and I trust Vanguard much more than life insurance companies.

[Ryan CUllinan]

My wife is a dual citizen (Thailand and the US), so she will pay US income tax on the proceeds of the trust.  The Vanguard fee is just the cost of doing business.  Other ways to do this (i.e. life insurance) have hidden fees, and I trust Vanguard much more than life insurance companies.

Actually. As part of the dual tax treaty that exists between Thailand and America you shouldn't be paying income tax on 401k/IRA or trust income.

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[scorecard]

20 hours ago, smutcakes said:

I went through this recently and looked into setting up trust funds etc to ensure that funds were properly managed and a regular income was provided and it was only under special circumstances that capital could be used which would need approval from the trust administrator. I was told that they don't have this service in Thailand yet. It seems the safest would be leased assets generating income, or dividends from shares- both of those have pitfalls but are obviously better than cash.

 

At the moment i am still going down the route of trying to educating them on living on income generated and the negative affect of income generated on blowing all the capital on worthless rubbish.

 

 

 

"...blowing all the capital on worthless rubbish."

 

Very true, my son already made his very detailed will which bequeaths his land and big modern house, vehicles, cash, any receipts from insurance policies and more jointly / equally to his kids and can't be touched until the youngest is 25 years old. And his will provides for a cash flow for his kids education, accommodation and food etc., until things can be sold (if the kids who will all be adults) want to sell or continue to jointly own the assets.

 

Why? Simple answer, his wife's parents and her brother and sisters have already made plans, as follows in bullet points:

 

- His wife is rather shy and she's the youngest in her family and she's frightened of both her brother and sister. And her brother and sister have pushed her several times to demand her husband (my son) give them expensive cars and more.

- They assume (with no evidence) that my son is mega rich, and they assume that my son and/or his wife will inherit a massive on-going pension for life from my home country when I die. (Again, they insist this is fact, but cannot provide and support for why it's fact).

- Her brother and sister insist that it's Thai law everything will go his son's wife when my son dies. (They insist this is the law, they always know the law about everything and it's always to benefit them). My son has told them their belief about the appropriate law is wrong but they say loudly that he's wrong and telling lies (plus they have spread rumours my son has another wife in another country and she will get everything when he dies - all untrue and the details they claim are not even logical. Son has given up trying to explain to them.

-  Their plan is to sell the house and land and 2 vehicles and give son's wife 20% and they get the rest, and they will all buy big cars. Truth is if they did get their hands on some funds they all need to provide a much better house and facilities for a better quality of living for their own kids and provide better education for their kids.

 

 

[TallGuyJohninBKK]

14 hours ago, smotherb said:

Before he died, a friend in the Philippines set up two trusts--one for his daughter in the States and one for his girlfriend in the PI. They were allowed to make monthly withdrawals of specific amounts until their trust was depleted. 

 

Smother, were those trusts established under U.S. laws and regulations -- or under some other country's rules? Thailand not having any law on trusts, AFAIK.

 

Also, do you know how the actual mechanics of how that worked?  In other words, "allowed to make monthly withdrawals..."   Did the trust admin do a monthly bank transfer to the two recipients?  Did the recipients have some kind of debit card with a monthly withdrawal limit?  Etc etc.

 

I think trusts can be a good way to go if you want to remove the potential for bad decisions and misuse by the recipient because they're not financially aware or have bad family, etc etc... But I've never been clear on just how any cross country funds movement would occur in those kinds of situations.

Edited July 20, 2018 by TallGuyJohninBKK

[TallGuyJohninBKK]

7 hours ago, James2020 said:

All of my assets are in the US, with Vanguard.  It simplifies things a lot, and the older we get, simple is better.  A trust will be set up for my wife when I die.  I did this with a US based attorney.  The trust (which is in the US) will make monthly payments to her, and the payments will be sent to Thailand, or wherever she is at the time.  Vanguard will be the trustee for only 0.55% of the assets in the trust, which is less than most banks, etc, will charge.  I need to use Vanguard's funds though for the trust, which I do anyway.  Thailand does not recognize trusts, and besides, I do not want to have my assets in Thailand.  My wife will be able to do what she wants with the monthly payments, but in your case, it could be controlled even more if you wish.

 

James, when you say Vanguard's fee is 0.55%, do you mean they assess that fee annually against your total AUM -- assets under management... And will continue doing so annually for every year the trust remains in existance?

 

Also, re your comment about needing to use Vanguard funds.... can you clarify....  Will they only do such a trust if the assets involved are invested in their own funds?  Or they also will handle the same arrangement for you if your trust includes stocks, REIT shares, etc etc?

 

Thanks much...

 

[TallGuyJohninBKK]

On 7/19/2018 at 11:09 AM, Bubbha said:

I would like to leave part of my assets to one or more Thai nationals who have very limited current income and future earnings potential. My goal is to provide long term income and financial security to these individuals.

 

Bubbha, very glad you started this thread. I've been wrestling with these same issues myself lately in trying to do some advance estate planning for something that hopefully is many years in the future.  And everything I have, mostly in the U.S., would go to my Thai wife.

 

The challenge, like others, is my wife is pretty unsophisticated when it comes to financial accounts / investments / investing -- pretty much anything beyond keeping money in a bank account. On the other hand, she is also thrifty and not a big spender even for herself. But she does have family who are less well off than she has become during the course of our marriage, so there's some risk there.

 

One thing I've done and is widely advised -- but I don't think has been mentioned here -- is to designate my wife as my Payable on Death beneficiary (for bank accounts) or TOD (Transfer on Death) beneficiary for my brokerage accounts. Which means, instead of having to go thru probate in the U.S. after I pass, supposedly, those accounts will either be paid to her automatically, or in the case of the brokerage accounts, will be transferred into her name in terms of ownership. And she does have an ITIN #.

 

But my broader challenge is the same one faced by others:

--I don't see providing a large lump sum of funds to her upon my death as being a likely good solution for ensuring her long-term financial future.

--Property and other hard assets in Thailand are fine, but obviously once you are gone, the owner can then sell them as they wish, get a windfall, and then fritter it away unwisely if so inclined.

 

I'm very much more inclined to find some solution like the trust approach mentioned above where the assets are held by a trust administrator, and then a certain percentage or share paid out monthly for life. My assets already are all in dividend paying investments, so they'll continue to throw off a decent monthly income even without touching the principal, or, instead, allowing a slow decline rate over time.

 

Annuities are another similar approach, but in that case, you're having to rely on the long-term viability of that particular annuity company-provider, which makes me a bit uneasy. And, more to the point at least right now, annuity interest rates/rates of return right now in the U.S. are pretty low because of the long period of low interest rates. But perhaps that situation will continue to improve in the next few years. However, I'm not sure it would be a good deal to be buying a long-term annuity right now.

 

Be very interested to see and hear how others are approaching this thorny topic.

Edited July 20, 2018 by TallGuyJohninBKK

[TallGuyJohninBKK]

4 hours ago, Ryan CUllinan said:

Thomas Carden can do it Nancy?
Susan is over from the US and she is one of the few people here in Thailand that is registered to sign off on ITIN numbers. Otherwise you're looking at a 6 month + wait
 

 

 

My wife got her ITIN a couple years back as part of my filing my U.S. federal tax return for the first time as married filing separately -- because she has no U.S. source income. Filed the ITIN paperwork along with my initial MFS return, and got her ITIN number back in the mail from the IRS in a month or two -- and of course the IRS used it for that year's MFS tax return I filed.

 

[TallGuyJohninBKK]

4 hours ago, scorecard said:

 

"...blowing all the capital on worthless rubbish."

 

Very true, my son already made his very detailed will which bequeaths his land and big modern house, vehicles, cash, any receipts from insurance policies and more jointly / equally to his kids and can't be touched until the youngest is 25 years old. And his will provides for a cash flow for his kids education, accommodation and food etc., until things can be sold (if the kids who will all be adults) want to sell or continue to jointly own the assets.

 

 

I believe, under Thai family law, the wife -- assuming he's still married and she's still alive -- is automatically entitled to half of the husband's Thailand-based estate -- at least covering the assets acquired/obtained during the course of their marriage. That's a statutory requirement.

 

Then, AFAIK, the husband (will-maker) is entitled to direct at his discretion where the other assets should go -- all of his pre-marriage non-community property assets, and his half share of their community property marital assets.

 

The husband can't leave everything (all Thai assets) to his kids, provided his wife is still living at the time of his passing.

 

Any non-Thai assets would, of course, be covered by the pertinent family law and probate rules in that jurisdiction regarding marital community property and inheritance.

 

 

 

Edited July 20, 2018 by TallGuyJohninBKK

[smotherb]

5 hours ago, TallGuyJohninBKK said:

 

Smother, were those trusts established under U.S. laws and regulations -- or under some other country's rules? Thailand not having any law on trusts, AFAIK.

 

Also, do you know how the actual mechanics of how that worked?  In other words, "allowed to make monthly withdrawals..."   Did the trust admin do a monthly bank transfer to the two recipients?  Did the recipients have some kind of debit card with a monthly withdrawal limit?  Etc etc.

 

I think trusts can be a good way to go if you want to remove the potential for bad decisions and misuse by the recipient because they're not financially aware or have bad family, etc etc... But I've never been clear on just how any cross country funds movement would occur in those kinds of situations.

I imagine they were set up under US laws because they were enacted through his US broker. I do not know the specifics; and as I said, he is now dead. My wife still communicates with his Filipino GF; she apparently still receives the money and its been almost six years since he died.

[James2020]

4 hours ago, TallGuyJohninBKK said:

 

James, when you say Vanguard's fee is 0.55%, do you mean they assess that fee annually against your total AUM -- assets under management... And will continue doing so annually for every year the trust remains in existance?

 

Also, re your comment about needing to use Vanguard funds.... can you clarify....  Will they only do such a trust if the assets involved are invested in their own funds?  Or they also will handle the same arrangement for you if your trust includes stocks, REIT shares, etc etc?

 

Thanks much...

 

Vanguard's total annual fee is 0.55% for assets under management of 1MM to 5MM, 0.25% for trust administration and 0.30% for investment counseling.  This is about half of the usual rate, but I found that the beneficiary must be a US citizen, so Vanguard would probably not work for the OP.

 

The assets are managed according to Vanguard's current investment policy, and all funds are invested in Vanguard Index Funds.  They would not manage real estate or individual stocks.  If you own other assets at the time of your death,  someone else of your choosing must transfer the funds to Vanguard Index Funds.

 

Depending on how much you have and the needs of the beneficiary, another approach is to gift the money to an institution that manages Charitable Remainder Trusts.  There usually are no fees associated with the trust, the beneficiary receives the income for his/her life, and when the beneficiary dies, the funds go to the institution.  I don't know if there are citizenship requirements.

 

You need to discuss all of this, of course, with an estate lawyer, making clear what your goals are.

[scorecard]

4 hours ago, TallGuyJohninBKK said:

 

I believe, under Thai family law, the wife -- assuming he's still married and she's still alive -- is automatically entitled to half of the husband's Thailand-based estate -- at least covering the assets acquired/obtained during the course of their marriage. That's a statutory requirement.

 

Then, AFAIK, the husband (will-maker) is entitled to direct at his discretion where the other assets should go -- all of his pre-marriage non-community property assets, and his half share of their community property marital assets.

 

The husband can't leave everything (all Thai assets) to his kids, provided his wife is still living at the time of his passing.

 

Any non-Thai assets would, of course, be covered by the pertinent family law and probate rules in that jurisdiction regarding marital community property and inheritance.

 

 

 

 

Not so sure about that, son's lawyer says Thai wills can override the law. 

 

Never the less there is the point that the wife is perhaps entitled to half of his assets, but what is they are permenantly estranged? And what is there has been a recorded payout to end their relationship? 

 

 

[NancyL]

10 hours ago, Ryan CUllinan said:

 

 

Thomas Carden can do it Nancy?
Susan is over from the US and she is one of the few people here in Thailand that is registered to sign off on ITIN numbers. Otherwise you're looking at a 6 month + wait


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I don't know.  Why don't you email Thomas Carden and ask him?

[Langsuan Man]

12 hours ago, NancyL said:

If you're going to have any money in the U.S. that is intended for the benefit of a Thai person, i.e. they will claim it after your death, do them a big favor and help them to apply for an ITIN (individual taxpayer identification number) now, while you're still around to help them.

I will defer to your knowledge but so far I have found no way to obtain a ITIN for a Thai (non spouse) prior to my death and probate.  I understand that married individuals can obtain an ITIN for their spouses but so far have not uncovered anything in the IRS publications about ITIN's that indicate a method to obtain one for a "future" beneficiary