The concept of the prenuptial agreement was brought to Thailand by Western expats who wedded Thai women while still under legal or social obligations to their former wives and children back in the West.
People heard stories of older American billionaires marrying younger ladies and taking care of their youthful wives by providing high salaries which ensured comfortable lives throughout the marriage, payable from an offshore trust while at the same time making sure the futures of their children from these former wives were secured by separate funds and inheritance.
Upon divorce, the new wife would still enjoy regular income from the offshore trust for the rest of her life even after the death of her senior husband, without having to compete with the man’s children for his inheritance.
Understanding how prenuptial agreements can be used today to give both spouses granular control of how they want things shared is important. Today all marriages in Thailand – even if one party is not a citizen – are subject to community property law. This means all income and nearly all the property acquired by one spouse will be classified as community property – half of which is vested in the other.
This has made some Thai couples, especially those in real estate, forego marriage registration for fear they’ll need mutual consent to buy and sell property.
Now that Thai law recognizes prenuptial agreements, they can be a powerful tool to give couples a new option to designate community property however they see fit.
How the Law Works
Bee is from a large, wealthy business family and marries Bim, whose roots are middle class.
Bim may resign from whatever job to join Bee’s successful business. Now all of Bee’s income and nearly all the property acquired will be classified as community property, half of which goes to Bim.
On the other hand, if Bim were from an equally elite background, all the generous cash and jewelry received from Bim’s parents at the wedding will be separate property belonging only to Bim.
The home where the newlyweds live may be separate from that of Bee’s parents, but they own the land where both homes stand. Bee and Bim’s home is recognized by Thai law as Bee’s separate property – in which Bim does not share ownership.
How Prenups Can Help
The statutory rights of both spouses to community and separate property can totally be altered by a prenuptial agreement signed prior to their wedding registration and put into force by being legally attached to the marriage certificate.
The land and house that are the separate property of one can now be divided from the main plot into a smaller title deed and turned into a community property in the joint names of both as co-owners. All the cash and jewelry from Bim’s parents can likewise be expressly given to both jointly as their community property. Basically, almost anything that a couple wants to add or subtract from each other’s property rights during their marital relationship can be spelled out in a prenuptial agreement.
Instead of delivering half of their high earning power to her already wealthy husband, a prudent wife might agree to transferring that half to an offshore trust created for the benefit of children to be born from wedlock. Another rich wife could also express her eternal love to a commoner husband by relinquishing all her rights to the income he will earn throughout his life, turning it into separate property only he alone can enjoy.
The community property rule applies to both foreign and Thai spouses but is limited by laws about what foreigners can own. When it comes to an actual transfer of land to a foreign spouse, the transfer registration cannot be done as Thai land law prevails. Foreign spouses are still entitled to the unregistered ownership of the land and can transform it into property they can own such as cash, by way of having their Thai spouses or estates (if the Thai passes away) sell the land to another Thai national. The sale proceeds belong to the foreign spouse.
Securing the Future
As for community property they may allocate to their future children, securing those benefits to the children permanently, safe from any undesirable changes, makes an offshore trust in the Western hemisphere necessary. They can stipulate a condition that the trust be used for the specific purpose of education. They can further limits its accessibility to whatever specific conditions they want, such as the time period between freshman enrollment in a UK or US university until graduation with an MBA or PhD. Such a security fund denominated in British pounds or US dollars will always be there for their children’s Western education 18 years from now. The young parents don’t even have to worry about the fund erosion from any prospective drops of the Thai baht currency over the decades to come.
Parents funding education abroad during the Asian financial crisis of 1997 will vividly recall the hardships families were going through. Before the crisis, parents would pay 50,000 baht to buy USD$2,000 from a bank and remit it to America for the child’s monthly allowance. During the crisis, the baht’s plunge saw parents paying double at 100,000 baht for the same amount of dollars. The family found it hard to a earn baht income to match the dollar expenses, especially those who borrowed dollars to do business. Some could not find enough to finance their children to graduation.
Thais are drawn to offshore trusts as there aren’t any financial tools locally to secure funding for a Western education against depreciation of the baht. Parents just pray for the baht to remain strong forever – aware that this is pure fantasy. Thai law has not allowed a trust to be set up. Investment overseas, through permission of authorized banks, comes in as an option to fill the gap for wealthy Thais to secure solid Western education for their children as well as future well-being for the younger generations.
Apportioning community property for children is something that should be planned in a prenuptial agreement as Thai law ensures that once the agreement is registered and appended to the marriage registration certificate, the agreement will become permanently valid and enforceable and incapable of being revoked, unless ordered otherwise by the court.
If you wait until after children are born then plan to give away part of the community property to an offshore trust, the plan can be regarded as a postnuptial agreement, revocable by either husband or wife throughout their marriage or within 1 year after their divorce, no matter how many decades that postnuptial agreement has remained in place.
Wirot Poonsuwan is a practicing attorney and can be reached at [email protected].