Setting Up Revocable Trust In Usa For Distribution In Los

[wittleus]

I wonder if anyone has had any experience with setting up a revocable trust (rather than just a will and normal estate) and having the assets of the trust distributed on a regular basis to people/persons in another country (in this case Thailand).

I am somewhat familiar with trusts and how they work (being the trustee of my parents trust). However, my question here would be setting up a trust for my GF and kids (in Thailand) and having the designated amounts distributed to their bank in Thailand on a monthly basis upon my demise.

Assuming no shrinkage, my estate, while not huge, will be quite considerable for a Thai, and rather than pass all the money, I thought it might be better to keep the money invested and dole out manageable monthly amounts. Again, if managed correctly, money could flow to the thai family in perpetuity.

Their are, of course US tax implications, because monies in the trust would be invested earning interest/dividends/income and of course the recipients would be neither US citizens nor residents. I am not sure how they might be handled but I expect I could hire an accountant/lawyer/etc or designate a trustee to take care of those aspects.

I expect most reponses will say, go see a lawyer--and I will, but, I am just wondering if anyboday has used trusts before to distribute assets overseas and could comment on how well they work. Of course, you might not know until you are dead, but maybe you have had a friend who has passed away but took care of his family abroad in such a way.

Also, does anyone know if Thai Law has anything similar available for farangs and can they be trusted. If not, how about other banking venues like Singapore. Any reponse or information or lead would be appreciated.

[Loom]

Good luck...Isn't the US tax code's long arm bad enough already?

I considered a trust but when I found out that the list alone of different types of trusts (revocable, irrevocable, living, blah, blah blah) is longer than the instructions for filing personal tax in Hong Kong and Singapore, I gave up.

I have a feeling trust law may have been devised for lawyers in the same way the US tax code was designed to give accountants an annual bonus. I'm sure you're a wise trustee and may even know how to manage money. But if not, aren't you giving the asset managers a nice monthly income with the fees they skim off the trust income. Or is a banker giving you a discount to t-bill yields and capturing the spread. Throw in the tax and legal filing requirements and then the funds might be going more for the benefit of accountants, lawyers and asset managers than the beneficiaries.

Try opening a custodial bank or brokerage account in Thailand, Singapore or Hong Kong for a minor? I don't even give it a thought.

I have, however, read that some UK nationals have set up trusts in the UK for the benefit of overseas relations in the real estate forum.

[wittleus]

Good luck...Isn't the US tax code's long arm bad enough already?

I considered a trust but when I found out that the list alone of different types of trusts (revocable, irrevocable, living, blah, blah blah) is longer than the instructions for filing personal tax in Hong Kong and Singapore, I gave up.

I have a feeling trust law may have been devised for lawyers in the same way the US tax code was designed to give accountants an annual bonus. I'm sure you're a wise trustee and may even know how to manage money. But if not, aren't you giving the asset managers a nice monthly income with the fees they skim off the trust income. Or is a banker giving you a discount to t-bill yields and capturing the spread. Throw in the tax and legal filing requirements and then the funds might be going more for the benefit of accountants, lawyers and asset managers than the beneficiaries.

Try opening a custodial bank or brokerage account in Thailand, Singapore or Hong Kong for a minor? I don't even give it a thought.

I have, however, read that some UK nationals have set up trusts in the UK for the benefit of overseas relations in the real estate forum.

You may have a point in the long run. Right now, I am the trustee of my parents trust, the asset manager, and I also file all the taxes, so there is no real payout to anyone outside the purview of the trust. The only real payout was the legal fees for establishment of the trust. I would expect to do the same in setting up my own trust as long as I were living and able.

However, If I were to set this up, with the idea of providing a continuous income after my demise, unless I gave very specific, immutable instructions on the asset management, I could see a lot of the misconduct (or, let's be real, legal theft) taking place after my death, as there would be no one I could trust to audit the management. Intructions in themselves may not be immutable because certain investment options may end and decisions would have to be made as where to go to next. At that point, control of the assets would be out of my already dead hands.

I guess I am looking for options for asset management after I am gone (which hopefully won't be for a long time). I will check out some of the options you mentioned. Do you know if there are any residency requirements for any of options you mentioned? I have been a part-time resident of Thailand (I come for 3 months, back to USA for 3 months, etc) for the last 4 years, but have been coming on a tourist visa.

[GuestHouse]

I think your planning is sound and sensible - and income is a far better option than handing over capital in Thailand - There will always be a relative sitting waiting with some get rich quick scheme that requires funding out of the money you pass over - at least with an income money lost will be replaced.

I helped an English friend establish a trust under his will when he learned he was dieing of cancer, the trust holds property and investments in the UK and distributes an income to his widow and daughter.

Lawyers have standard packages that they set-up, and your lawyer will be able to advise on what bests suits your situation. I can't speak for the US, but fees in the UK are reasonable.

There is no Trust Law in Thailand, so do be extremely careful of any advice regarding leavng funds under the control of a Thai lawyer. What is often called a tust in Thailand is actually a deed of power of atourney and leaves your wealth entirely in the hands of the lawyers - NEVER EVER SIGN A POWER OF ATOURNEY IN THAILAND.

For information, Trust law in England was established at the time of the crusades, knights and nobles would leave their wealth in trust (usually held by the church) the wealth would be cared for during their absence and retuned to their family on death. Trust law late became a vehicle for doing exactly what you hope to achieve and for tax avoidance.

A point to note about Trusts is they hold and control the wealth, the person whose wealth it 'actually is' has no control over the money etc

Trusts are a lot more common than people would believe, anyone with a private or company pension in the UK holds their pension fund in a Trust - A point to note, wills should not dictate what happens to wealth held in Trust (that is for the articals of Trust to dictate). Controlling a Trust through a Will can break the tax protection and land the trust with death duties.

[backflip]

"A point to note about Trusts is they hold and control the wealth, the person whose wealth it 'actually is' has no control over the money etc"

For a blind trust, that's true. But for a revocable trust, it is not true. I set up a living trust in the US, and I get to do with it as I please. I get to choose the trustee, the investment vehicles, and the distribution - whether the assets are real or monetary. The trustee has the responsibility over thousands of trusts, some in the hundreds of millions of US$, and I'm not worried that the institution is going to cheat me, or my modest trust. In sounds as though someone close to you has hurt you deeply, and you don't trust anyone. That's a real shame.

[taxout]

" . . . money could flow to the thai family in perpetuity."

No, the Rule Against Perpetuities forbids this: a trust must have a limited lifetime.

[GuestHouse]

In sounds as though someone close to you has hurt you deeply, and you don't trust anyone. That's a real shame.

I don't know who that is aimed at, I've read the posts here and it seems none warrant the attentions of the amateur trick cyclist.

[Loom]

There are several US-based companies in this business but mostly for US beneficiaries (offering services as trustee and asset manager) but normally act as "private bankers" meaning they won't talk to you if your net worth is less than a few million. US Trust based out of New York did this but they were acquired sometime in the past decade by a company I don't remember.

I agree with the general concept of a trust as a way to pass along wealth but get bogged down with the tax issues, especially if the inheritance goes to a non-US citizen / non US resident (non-resident alien). Then it would be far better to have the money invested outside the US, in my opinion, and probably best for that reason for the money to be in a non-US trust vehicle. I believe the taxes on investment gains, dividends and interest in most Asian countries is going to be far less for a US non-resident alien than for US-based investments. In Asia ex-japan, there's not a single country that taxes capital gains from stock market investments. That's assuming distributions from a US-based trust are taxable, even if income generated assets held by the trust is not taxed at the trust level.

I don't know if Americans can set up UK-based trusts or if those trust would be subject to the same tax rules as in the US.

If you do a trust without the help of one of the established trust managers, there's the question of who will be capable and around long enough to do a good job investing and administering the trust assets.

Just for the sake of simplicity, I'm thinking more in terms of educating my heirs about the merits of generating income with wise investments, not living beyond their means, and leaving a lump sum with specific instructions for investing with non-US fund managers.

[Heng]

Just for the sake of simplicity, I'm thinking more in terms of educating my heirs about the merits of generating income with wise investments, not living beyond their means, ...

This is really the gist of it all. The problem is, it generally takes quite some time to do this (not just a few weekends a month with a white board and a few finance texts)... and if you don't start this type of education when people are young, it often doesn't take well.

[Loom]

Just for the sake of simplicity, I'm thinking more in terms of educating my heirs about the merits of generating income with wise investments, not living beyond their means, ...

This is really the gist of it all. The problem is, it generally takes quite some time to do this (not just a few weekends a month with a white board and a few finance texts)... and if you don't start this type of education when people are young, it often doesn't take well.

I've heard lots of stories of Thais with wealth in land ruined with debt, gambling (the first country to fall in the Asian financial crisis was Thailand?). Maxing out the credit cards, living on paycheck/allowance from month-to-month, buying luxury goods to keep up with friends/neighbors, buying investment assets at the top of a bubble, aren't just problems experienced in Thailand, however. It can be a problem anywhere: otherwise smart people who are absolutely stupid when it comes to managing finances. I've seen Thais on both sides of the spectrum...those that save every penny of their allowance and those who have maxed out the credit cards to buy the latest fashion craze.

Prudent financial management, among other key aspects of living, is something that has to become an ingrained personal value. Personal finance should probably be part of early education. I eventually learned the hard way that I wanted to develop more financial independence, but did my share of spending on useless things when I was younger.

[Heng]

Prudent financial management, among other key aspects of living, is something that has to become an ingrained personal value. Personal finance should probably be part of early education.

Couldn't agree more. The problem is that some folks meet their spouses when both people already have ingrained personal values. A lot of folks seem to also pair up with folks from the opposite end of the socio-economic spectrum. I was fortunate enough to marry someone whose family has long had a similar (to my family) philosphy of finding a balance between enjoyment of life and savings/reinvestment.

Great advice for those starting families though.

[wittleus]

As the one who started this thread -- my initial inquiry was prompted by the fact that I was dubious whether the Thai family I have been involved with will be able to handle "larger" sums of money than they were used to, invest it properly and insure the flow.

My family, initially came from the "poor side of town", the adults(extended family here) were not well educated, yet have proven, to this point, to manage their budgets carefully. Over the last 5 years, there have been no rash expenses. They have had credit cards (backed by me), and all expenses have been for normal requirements.

Over the last few years, I have slowly increased allowances for living and all expenses to the house and property have been handled responsibily, even in my absence. My thai step-children (who have wholly accepted me as their father, at this point), have recognized the educational opportunity they now have, and have performed exceptionally in school and are headed for the university. They have never asked for anything extraordinary, and the older ones, having realized their new situation, often chide the younger one with "you don't remember being poor, do you?" inuendos. The extended family (brothers, etc.), to this point, continues to be hard-working and family-oriented, as all the brothers have families and have been with their wives over 15 years. They come over to the house often to visit (the grandmother lives with us) and have never asked for a cent from the farang in the family. There has been no evidence of gambling whatsoever in the family to this point.

We have looked at a few business ventures and additional land acquisition very carefully and have passed on most. So I would say that the family is slowly learning asset management and the children who will be university-bound, could, of course, learn this on a more formal basis. At the same time, I don't know what might happen if "a whole bunch of cash" were to land on their lap suddenly -- so this is the basis for this thread.

This all being said, I was basically looking for a vehicle to maintain the monetary flow and increase it as the cost of living and family conditions warranted. As I was familiar with trusts, I was wondering how effective the vehicle might be if the assets flowed out of the country, and how that aspect might be managed? Could it be managed by non-US citizens, or even if I could assign those responsibilities to such a person? I guess I was hoping that someone on this board had either already investigated this approach or had a deceased friend who had tried this approach and they, in turn could comment on the effectiveness of this approach. And, of course, what might be other vehicles for management? Either in USA or in Thailand, Singapore,or wherever, as I am not yet familiar with any of the financial/management opportunities in any of those countries?

While my assets might be borderline for the "private bank" route, I am still dubious about whether my wishes would be carried out or whether the assets would be managed effectively. My experience with most "asset managers" in USA, is, given control, they tend to manage in a manner that (1) coincide with "success" in the eyes of the company they worked for, and (2) is most advantageous at building their own personal wealth.

Anyway, that being the gist of my situation, I am still looking for information as to how many of you ex-pats might handle your estate to ensure sound managment and continuous flow? The revocable trust vehicle happend to be one I was familiar with, at least as far as its ramifications in the USA proper.