Modern Succession Planning

Do you want to comprehensively protect your assets from potential predators? Trusts are one of the least understood forms of asset protection and yet they are often so simple. Attitudes to the use of trusts are beginning to change for many expats.

Some expats misunderstand the concept of trusts and how their succession planning could benefit from such vehicles. Many adhere to the old fashioned thinking that once trustees get hold of your money you will never see it again.

These days most people working in their country of origin have an employer pension. All these pension schemes are written into trust, a little known fact to many. Some say that trustees have made a mess of pension schemes over the last eight years. It is certainly true that many are in difficult financial circumstances, with projected shortfalls in payable benefits or outright insolvency. This is mainly due to poor investment decisions by the investment managers. The majority of such schemes are accountable to their government who ultimately offer some form of protection. Whilst this is usually not in the form of guarantees to pay full benefits, without assistance many schemes would have crumbled already.

Some expats have transferred their UK private pension to a qualified recognised overseas pension scheme (QROPS). Many do not realise that these schemes are managed by trustees on behalf of the members, a move that is made mandatory by the UK Government in order to protect pension assets. Once they realise this fact, expat members become much more comfortable with the use of trusts because they recognize their practicalities.

As we get older we eventually submit to the effects age has on our everyday capabilities. So, realistically, when it becomes too much for you to manage your own affairs, who can you depend on to assist you? Many expats realise they need to take action in preparation for this possibility.

Arrangements can be made for any of your assets to be placed in the care of trustees. It does mean that you legally pass ownership of your assets to the trustees who then are tasked to act in the best interest of the beneficiaries, whom you specify at outset. These beneficiaries can include you.

So, why would you place any of your assets in the care of a trustee?

The answer lies in a number of simple points:

  1. Protection of assets from attack or from prying eyes by unwanted third parties
  2. Management of your wealth as you get older and become less able to direct your own affairs
  3. A measure of control over the assets you wish to give away
  4. Protection of assets from potential capital gains tax
  5. Management of potential assessment of inheritance tax on your estate
  6. Protection of beneficiaries by preserving their eventual inheritance
  7. A succession plan which is far superior to a formal will
  8. A perpetual plan which can continue ad-infinitum

How does all this work in practice? Let’s take a look at a real case:

George is a British expat who retired from his career with a multinational corporation (MNC) after he met his Thai wife, Nok. George and Nok have a house in Thailand which they and the family live in. He also owns a property in London. George has transferred his UK pension to a QROPS but has drawn no benefits yet.

George has been saving throughout his expat life and now has several investments consisting of retirement savings plans and an offshore personal portfolio bond (OPPB). He is concerned that when he dies there may be difficulties for the family to manage the financial situation. George discussed this with me and we agreed to tackle several issues which may arise.

George has two children with Nok, a son in his late teens and a daughter in her early twenties who is planning to be married soon. He also has a daughter by a previous marriage who lives in the UK and is now married with a daughter of her own.

 George is concerned that if he dies unexpectedly his legacy could fall into the wrong hands. It is common for many “relatives” to appear in Thailand when such events occur. The entire inheritance could evaporate if there is no protection for Nok and she is exposed to unfair claims.

We determined that, as George is domiciled in the UK, his estate will be subject to inheritance tax (IHT). Currently the tax exposure would amount to something around £500,000. The use of trusts can assist here but will not necessarily remove the entire liability.

George is also mindful of his granddaughter and the possibility of other grandchildren in the future and wishes to encompass them into a succession plan in advance. This is difficult to do with a simple will, although not impossible.

It looks as if George has a relatively complex case. Next time we will study how some simple solutions will put him in a position to achieve all the results he intends.

Questions to the author can be directed to PFS International on 02 653 1971 or email to

Andrew Wood has been an expat in Asia for 34 years and is Executive Director with PFS International. He has been writing Net Worth articles for six years and has made a significant contribution to the PFS library of financial service articles dating back over nine years. These articles which cover the complete A-Z of financial planning are available to readers on request.

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