Wills & Living Trusts

Those who have decided to make South East Asia home in their golden harvest years have usually taken steps to ensure they have an up-to-date Last Will and Testament in each country where they own real estate or other significant investments. Insurance policies, investments, pensions have usually been covered, but asset protection and succession arrangements to deal with the change of circumstances brought about by a new life in South East Asia often have been overlooked.
 
Let us take the example of John & Jane Smith. John, a career investment banker and long-term British expatriate from Hong Kong, retired at 55. Over many years the demands of a hardworking career affected John’s lifestyle, causing domestic disharmony and eventually Jane asked for a divorce. She returned to the former family home in rural England to be closer to their family, now grown up with children of their own. John & Jane Smith had grown apart over the years and had separate interests and changed feelings for each other. They agreed terms for their divorce settlement. Naturally, they each made a new Last Will and Testament, and divided their material assets, the family home and two investment properties in London. Jane then owned the home in Cheshire and John kept the two buy-for-rent investment properties in London, both mortgaged and tenanted, comfortably meeting the monthly mortgage commitments from the rents. John has private and employment related pensions as well as investment income.

John Smith purchased outright a freehold Bangkok condominium apartment suitable for the years ahead with his lump sum termination payment. He also obtained a retirement visa for Thailand.
 
After several months John Smith has a social circle of friends and acquaintances in his new environment, and continues to build an enjoyable lifestyle for himself in Bangkok. In time, John has grown close to a young Thai lady, who is also a single parent. The implications of John’s new domestic circumstances increased the animosity and strains in the remaining post-divorce relationship with Jane, and John has little contact with any of his first family, much to his great regret as he misses his grandchildren particularly.
 
Today, at 59, John Smith lives happily in Bangkok with his girlfriend of more than 3 years and her 11 year old daughter in the apartment John purchased in 2004. Although still in good health, John has had to adjust to a diabetic condition and needs to keep an eye on his blood pressure, not always helped by a sometimes intrusive level of visits from his girlfriend’s relatives. Re-marriage is a possibility, but not yet.
John Smith has a number of issues that keep him awake at night. He knows that he needs contingency plans. They are:

a) Who will manage and administer his financial & personal affairs, care for his welfare and domestic commitments in Thailand should he have a stroke, heart attack or some similar misfortune?

b) How can he be certain that his grandchildren, girlfriend and her daughter will be properly taken care of in accordance with his wishes when mortality eventually catches up with him, protecting them from the undue and unwelcome influence and interference of their respective extended families?

A Protective Trust, in particular the “Guardian Angel Trust” service in Mauritius may provide all the answers.

The use of Mauritius for clients in South East Asia is practical for a number of reasons:

• Mauritius has well established trust service providers operating within a thoroughly well regulated industry since 1992.
• A former British colony, Mauritius is now an independent republic with a common law legal system established by Britain. It is not subject to the political influence of the European Union which some Caribbean offshore dependent territories still are. Issues such as exchange of information and the effect of the European Union’s Savings Directive all need to be considered when selecting a trust jurisdiction.
• Mauritius is in a time zone 3 hours behind Thailand and SE Asia, making communications during working hours easy compared with Europe and the Caribbean.
• Cost savings - Trust fees are up to two-thirds cheaper in Mauritius than Jersey, for example, for the same service.
• Representatives, managers and executives of the licensed trust company are accessible and available physically in the region almost continuously.  
• Mauritius is a multi-lingual, multi-cultural country. Most staff in Trust companies speak at least two languages.

Having chosen to use a trustee in Mauritius, John Smith and his peer group need to consider transferring some, if not all, their assets into a protective trust. This is a major step, since it involves the irrevocable transfer of ownership of assets to a legal third party, the trustee. This act of settlement by Mr. Smith and his friends, who become settlors of their trusts, should be done carefully because it may well give rise to tax consequences such as an Inheritance Tax charge in the United Kingdom. Careful consideration of each client’s particular circumstances might mean that the trust should be the beneficiary of the Last Will and Testament. Once it is clear that a protective trust is needed and settlement of assets has taken place, the settlor remains the principal beneficiary of the trust during his lifetime, and whilst concerns are always expressed about control of the assets, the settlor or his financial advisors may be Protectors of the trust and exercise decisions concerning investment strategies. Furthermore, the power to appoint and dismiss trustees can also be reserved to the Protector. There is no need for assets and investments to be moved; the trust itself, together with the trustee, is legally located in Mauritius, everything else stays where it is.
 
None of these critically important arrangements can be made simply by filling out an application form. For John Smith and his like, entrusting other people in another country with the powers to take responsibility for his welfare and that of his nearest and dearest is a major step. A face to face meeting with the trustee’s executives is an absolute minimum requirement to establish a rapport and a degree of understanding that addresses all concerns. The Guardian Angel Protective Trust is intended to be a lifelong relationship in most cases. Monthly contact by telephone initiated by the trustee’s staff should be a minimum constant contact. As years pass, contact becomes more frequent, fortnightly or even weekly for clients in their seventies or eighties, or in special circumstances.
 
Unlike onshore regimes with periodic tax liabilities for trusts, the trust income is tax free in Mauritius, and there are no capital gains taxes. There are also no taxes on inheritance. Tax issues may arise in other countries where assets are located, such as John Smith’s properties in London, if these are transferred to the trust. That raises more issues which must be left for another time.
 
At a practical level, the Guardian Angel Protective Trust’s role is to ensure continuity of income for beneficiaries as well as welfare and lifestyle management for clients in South East Asia. Monthly payments to a local bank account in Thailand, liaison with family members, dealing with life and health insurers, investment advisors, legal representatives and being well placed to deal with a client’s changing wishes. are all part of a service that arises from some of the most important decisions ever taken in the life of any person. Ultimately, in due time, the Trust will help with probate of the Will.