Culturally, Thais are not really in the habit of making wills to manage and distribute assets after death, preferring to let the law take over. In other cases, they remind themselves to write it out, but never get around to it until their departure, intestate (legalese for dying without a will).
It therefore happens that loved ones of varying relation are at odds with distant kin, the one controlling the estate “hogs” it by hiding some assets or getting into disputes with the others, with everyone forgetting what the law says. The peaceful ones, who are reluctant to wage a court battle for the sake of family unity, could end up losing and being deprived of their well-being and a fair share of assets for years or the rest of their lives.
Thai inheritance law affords equal importance to spouses, children and parents property owners. By law, each of these rightful heirs receives an equal share of inheritance at the passing of the owner.
Commercial banks where the deceased had savings accounts will allow anyone to withdraw cash until a final court order appoints the administrator of the estate. Heirs in dispute objecting to the appointment of an administrator could prolong the trial for years, locking in the much-needed cash in the bank’s vault.
A will designating an administrator – while the will maker is still alive and well – will ease the court process and quiet any potential objection.
There are two differing ways to dispose of assets by will: general or specific. A general disposal goes by portions by allocating each portion of the estate to each beneficiary, called legatee. Imagine a pile of assets, with one-fourth given to a surviving child, one-half to the surviving spouse, and so on. Although the will is silent on the will maker’s debt, the beneficiary of a general will be allocated a portion of debt corresponding to his portion of property.
This type of general will can be used by a well-to-do person, who is childless, to map out their inheritance tax planning by gifting the entire property, valued in excess of 100 million baht, to their living spouse as Thai law completely exempts inheritance taxes for the spouse.
For a specific will, there have been cases where an owner of land did not wish to have non-family members own the land after his death. He made a will requiring his children to set up a company in which they hold equal numbers of shares then transfer the land to it. This bars any child from transferring their shares to outsiders. Only internal transfers among the original shareholders are permitted.
Other significant landowners are children of a wealthy tycoon. They separately own land banks of varied values, all inherited from their father, with high stacks of title deeds. These siblings love one another and vow to equalize and correct the values of their landholdings. They establish a company, transfer their lots to the company and hold different numbers of shares. They then average out their shareholdings, transferring the excess shares to other sibling shareholders at par value, free from capital gains tax, so that each of them now holds an equal number of shares.
Another episode of transferring land to a company to pay for shares in a new company is also very popular and need not wait for a will to be written. It can be done now if the land has been used for business prior to the transfer date, such as on lease to others or a gold shop using the land as its place of business. The transferor is exempt from 100 percent of personal income taxes and nearly all other transfer fees and expenses, provided the transfer is completed by Dec. 31.
If you intend to do this for inheritance purpose, you can complete the company setup and land transfer first, then make a will to say that, after you leave this world, to which children how many shares of your 99.99 percent stake in the land-owning company will be disposed of. A ban on them selling the shares to non-siblings can also be inserted.
Not all children are born equal. Some adult children are not doing well in life or career. Maybe they are getting old and unemployed, staying home with mom and dad and relying on their pensions to live. But they’re good people taking care of aging parents, driving them around, taking them to the hospital, running their errands. Parents worried such children won’t have a house to live in after they pass can make a will, specifically gifting the homestead, house and land of their current residence, to these poor children and leave them a comfortable sum of money with no future need to bother better-performing brothers and sisters. Otherwise, left to the inheritance law, they might not make out as well – or be ensured of the house – amid smarter siblings.
The biggest problem of wills are their validity. The law is quite strict on the form and substance of a will; a breach of the prerequisites can render them null and void. Someone who writes a will for the maker to sign, for example, cannot become a beneficiary. Neither can the witnesses who attest the signature of the will maker. Nor can the spouse of the writer or the attesting witness. There must be at least two witnesses signing below the signature of the will maker to witness his signing. The two witnesses must sign immediately together after the will maker signs his name.
A prevailing practice of the will maker signing first and then finding two people to sign as witnesses later is clearly outlawed. Since attesting witnesses cannot receive any property from the will, children and grandchildren of the will maker can surround him and participate in the will signing ceremony, but none of them can sign as an attesting witness.
Another complicated issue is the mental capacity of the will maker. He should not wait until he is too sick or too old to make a will. If he is proven to be mentally impaired while executing a will, for instance when suffering from advanced Alzheimer’s disease, the will can be challenged and declared void. In such cases, an affirmative certificate from a regular doctor of the patient, a video of the signing ceremony and a raft of pictures of the will-execution moment, together with the will maker reading a statement to show his sufficient mental capacity, can be helpful in case there is a future court contest.
Wirot Poonsuwan is a practicing attorney and can be reached at [email protected].