Many expatriates living in Phuket have lived in quite a few countries before coming here.

Many of these expats have acquired assets in several of these countries and have retained them as investments.

Looking after such a geographically spread-out estate may be manageable during a lifetime, but what happens when the owner of such assets dies?

Without proper planning serious problems can arise for a widow who may not have any understanding of business or for offspring who are still minors. In many cases, expatriates would be better off using an offshore trust to avoid complications.

But what is an offshore trust; indeed, what is a trust?

A trust is a legal entity that can hold and manage assets including companies, property, bank accounts, stocks and shares and anything else an individual may own.

The trust is governed by trustees who may be either individuals, banks, accounting firms, legal firms, insurance companies, trust companies or any of a variety of other entities.

If a trustee is a professional corporate body, it has a legal obligation to manage assets professionally. If it does not, then it is liable for any costs or losses due to its negligence.

The advantage of such a trust is that it is simple because all the assets of the settlor, the person who sets up the trust, are held in the trust’s name and the trust is based in one location.

Nearly all offshore trusts are situated in tax havens such as the Channel Islands or the Isle of Man. For non-residents, these are true tax havens and no death duties or tax is paid.

Choosing the right trustee, the person who manages the trust, is important. I recently heard a good tale that illustrates this point. A Thai lady with two young children lost her husband.

The deceased husband was originally a resident in Hong Kong where he owned property and a business, however he also owned properties in Britain.

The husband left a will that put all his assets into a trust after his death. He had wanted all but one of these properties sold by his trustees and the capital invested in a trust that would provide sufficient income for his widow and children.

Although he was an attorney, he had made a terrible mistake. He gave absolute power over his estate to friends whom he had appointed as trustees.

The deceased had owned a nice house in Phuket, but with a large mortgage. The trustees decided that his widow must rent out this house in Thailand and move to one in Britain.

The trustees were deaf to her pleas that she had never been to Britain, couldn’t speak English very well and that neither she nor her late husband intended that she should ever stay in the UK.

The lesson here is that appointing individuals as trustees is dangerous. Apart from other problems, there is a good possibility of fraud. If our attorney had appointed a corporate body as trustees his wishes would have been carried out faithfully.

Apart from any other consideration where individuals have been appointed trustees, there is always the potential problem of death or severe illness interrupting their ability to serve as trustees. Some security may be found in the use of a “protector”.

The protector has veto rights over the trustees who must obtain the protector’s signed confirmation of their every action.
The drawback is that this can add unnecessary delays. I dealt with one case where the trustees were unable to act for six weeks because the protector was traveling in the US and nobody knew his itinerary.

One of the cheapest ways to form an offshore trust is by using the services of a trust company that is owned by an offshore insurance company. This reduces the cost of establishing and maintaining a trust by a very substantial amount.

It also allows for smaller amounts to be placed into a trust. Most corporate trustees will otherwise refuse to accept assets worth less than about UK?250,000 (about 17 million baht). I recently came across a well-known international bank that will not manage a trust unless the assets exceed US$3 million (about 120 million baht).

Apart from the advantages, trusts can be very useful instruments to protect assets in the case of divorce. With an offshore trust, you retain control of the assets, including the right to withdraw all the funds from the trust.

There are many different types of trusts. In most cases, expats will select an offshore discretionary trust as it is the most flexible. But, as with all aspects of personal financial planning, it all depends on the individual situation. One of the advantages of an offshore discretionary trust is that the trustees are guided by a letter of wishes.

During the lifetime of the settlor, this document can be changed at anytime to include or exclude beneficiaries or the terms in which they can benefit. It is not necessary to have this document drafted in legal terminology. Trustees simply want clear instructions that are not ambiguous.

Richard G Watson runs Global Portfolios Co Ltd, a Phuket-based personal financial-planning service. He can be reached at Tel: 076-381997, Fax: 076-383185, Mobile: 081-0814611. Email: imm@loxinfo.co.th

Tesco rejects tax accusation

PHUKET: Tesco-Lotus has defended itself against Phuket Chamber of Commerce (PCC) critics by issuing a press release stating that it paid 18 billion baht in taxes in Phuket in 2006 alone.

Tesco was responding to a remark by PCC President Eam Thavornwongwongse that PCC members believed that large retailers were able to avoid local taxes because their corporate headquarters are in Bangkok.

Tesco’s press release said that in 2006 the Phuket branch paid more then 18 billion baht to the provincial revenue office in sign tax, property tax and VAT.

“This is because we have every intention of being a good member of the Phuket community.

Meeting our tax obligations in full is one way of demonstrating our sincerity to the community and local authorities,” he said.

“In fact, at the national level, we are one of the top-ranking companies who contribute the highest tax revenues to the Thai government.

“Therefore, we are ready to discuss this matter in more detail with the Phuket Chamber of Commerce so there will be no more misunderstandings,” Dr Darmp added.