Family Money: Leaving It All Behind You – Part 2
Managing director of Westminster Portfolio Services (Thailand) Ltd.
To plan for what happens to assets after someone dies,
making a will is an obvious way to limit IHT liability. One of the
best-known UK exemptions is gifts between spouses. However, what many
married people fail to realise is that if one half of a married couple is
domiciled in the UK but the other is not (e.g., you have a Thai wife),
then the exemption only covers the first ฃ55,000 of the estate.
Another common pitfall married couples fall into is
leaving their entire estate to each other. Admittedly there would be no
IHT on the first death, but this would increase the assets of the
surviving spouse thus making a bigger taxable estate when she/he dies, and
the children and other heirs would be facing a nasty big tax bill. The nil
rate band at the first death would have been completely wasted.
A good way round this is for the person making the will
to leave an amount equivalent to the nil rate band to their children, in
trust, on the death of the first spouse. A reduced amount of tax would
then be payable on the death of the second spouse.
Where this becomes problematic is when a property is
gifted but the owner continues to live in that property without paying the
full market rental. In this case, the Inland Revenue (IR) deems it a gift
with reservation of benefit and it is still classed as part of the estate.
“Gift with reservation occurs if you give something
away but continue to enjoy that asset in any form whatsoever,” says one
expert tax planner. “In IHT terms, the gift is deemed never to have left
your estate in the first place so rendering the whole process
Trusts are the most common way to mitigate IHT
liabilities. In a flexible trust, assets are held for the benefit of a
class of beneficiaries defined in the trust deed. The trust is created by
an individual (the settlor) who transfers assets to one or more trustees
who in turn hold the assets for the beneficiaries.
Discretionary trusts allow the trustees to distribute
assets and income at their discretion. They are useful if it is
inappropriate to make lifetime gifts direct to the next generation. If the
trust is set up for only the unused balance of the nil rate band there
need be no IHT payable on creation. There will be a further charge every
ten years and as assets leave the settlement, but this is minimal.
Accumulation and maintenance trusts are discretionary
trusts in which all the beneficiaries must become entitled to their share
of the assets on or before the age of 25. These are hybrid discretionary
trusts for children and grandchildren. They have some of the advantages of
an ‘interest in possession trust’ in that they don’t attract a
charge when you transfer the assets in the first place, but they also have
the flexibility of a discretionary trust.
Offshore trusts can be set up for some investors,
particularly non-domiciled residents in the UK. Although much thought and
care needs to be given to income and capital gains tax issues, running
costs, and how assets will leave the settlement in the fullness of time,
offshore trusts can be an extremely effective IHT planning route for this
type of investor. They can enjoy income and/or capital from the trust
while it remains entirely outside of the UK IHT charge, regardless of what
happens to their personal domicile.
“The use of offshore trusts for a non-domiciled
person is almost essential,” says one expert advisor. By virtue of
putting assets into trust when the person is not UK domiciled, the assets
in that trust are then perceived as excluded property. If the investor
plans to stay in the UK for a long time and attain UK domicile, they
transfer their offshore assets into the trust.
Offshore trusts are not suitable for investors already
resident and domiciled in the UK, however, as there is virtually no income
or capital gains tax benefit from doing so. Many UK domiciled clients have
to be talked out of setting up offshore trusts, believing erroneously that
this is the answer to all their problems. It isn’t: it can be the start
of them. When they are made to understand the tax consequences, they
quickly realise that offshore trusts are not a good option for onshore
residents. For IHT planning, concentrate on wills, lifetime gifts and
Transfers to your spouse are always exempt, whenever
you make them. But transferring everything to your husband or wife won’t
reduce tax – it will just defer tax on the whole amount until he or she
dies. In effect, you will have wasted your ฃ255,000 nil-rate band.
There is a way to use the nil-rate band, though, and
let your spouse have the benefit of the assets: setting up a will trust.
This lets you transfer up to ฃ255,000 to other beneficiaries within
the nil rate band, leaving any remainder to pass tax free to your spouse
– and your trustees can then ‘lend’ all or part of the ฃ255,000
to your spouse for his or her lifetime.
It’s a plan that lets married couples take advantage
of each of their nil rate bands, and ensure the surviving spouse can still
benefit from the income and capital value of the assets.
Gifts or transfers in your lifetime have to be genuine
to become exempt – which means you can have no beneficial interest in
them. So you can’t go on receiving income or capital from your
investments and make them exempt from tax.
There is a way round this, though: using a loan trust.
You effectively lend capital to the trust, which freezes the value of your
investment for inheritance tax purposes. The original capital remains in
the estate, but the beneficiaries gain from the growth on the investment
as it is free from inheritance tax. You can take an annual income of up to
5% of your initial investment, free of income tax at the time of payment,
in the form of a loan repayment (to you). It’s an effective long-term
inheritance tax plan that still gives you access to the capital invested.
This type of tax planning suits clients with
complicated requirements, as the solutions are often more flexible than
those within packaged products and can be tailored specifically to an
But as with most things, try to follow the ‘KISS’
rule: keep it simple, stupid.
Personal Directions: Focus on the donut, not upon the hole
By Christina Dodd,
founder and managing director of Asia Training Associates
Recently I held a seminar for young entrepreneurs who were
feeling a little tired and weathered having gone through some difficult times
in their businesses. They needed to “get back on track” and so we had two
intensive days of doing just that!
One area that we devoted a lot of time to was goal setting.
I know I have talked about the importance of goals and setting goals in
previous articles, but I cannot stress it enough as being one of the major
reasons as to why we can succeed and have enriched, meaningful and happy
I have read many books on the subject and Shiv Khera, whom
I have referred to previously, puts it so much better than many writers out
there. He has some enlightening words on the subject and I hope you enjoy them
and gain from them just as I have.
“Knowledge helps you to reach your destination provided
you know what the destination is.
An ancient Indian sage was teaching his disciples the art
of archery. He put a wooden bird as the target and asked them to aim at the
eye of the bird. The first disciple was asked to describe what he saw. He
said, “I see the trees, the branches, the leaves, the sky, the bird and its
The sage asked this disciple to wait. Then he asked the
second disciple the same question and he replied, “I only see the eye of the
bird.” The sage said, “Very good, then shoot.” The arrow went straight
and hit the eye of the bird.
What is the moral of the story? Unless we focus, we cannot
achieve our goal. It is hard to focus and concentrate, but it is a skill that
can be learned.
On the journey to life’s highway, keep your eyes upon the
goal. Focus on the donut, not upon the hole - Anonymous
Keep your eyes upon the goal
On July 4, 1952, Florence Chadwick was on her way to
becoming the first woman to swim the Catalina Channel. She had already
conquered the English Channel. The world was watching. Chadwick fought the
dense fog, bone-chilling cold and many times, the sharks. She was striving to
reach the shore but every time she looked through her goggles, all she could
see was the dense fog. Unable to see the shore, she gave up.
Chadwick was disappointed when she found out that she was
only half a mile from the coast. She quit not because she was a quitter, but
because her goal was not in sight anywhere. The elements didn’t stop her.
She said, “I’m not making excuses. If only I had seen the land, I could
have made it.”
Two months later she went back and swam the Catalina
Channel. This time, in spite of the bad weather, she had her goal in mind and
not only accomplished it, but beat the men’s record by two hours.
Why are goals important?
On the best sunny day the most powerful magnifying glass
will not light paper if you keep moving the glass. But if you focus and hold
it, the paper will light up. That is the power of concentration.
A man was traveling and stopped at an intersection. He
asked an elderly man, “Where does this road take me?” The elderly person
asked, “Where do you want to go?” The man replied, “I don’t know.”
The elderly person said, “Then take any road, what difference does it
How true. When we don’t know where we are going, any road
will take us there.
Supposing you have the football eleven enthusiastically
ready to play the game, all charged up, and then someone took the goalpost
away. What would happen to the game? There is nothing left. How do you keep
score? How do you know you have arrived? Enthusiasm without direction is like
wildfire and leads to frustration. Goals give a sense of direction.
Would you sit in a plane or a train without knowing where
it was going? The obvious answer is no. Then why do people go through life
without having any goals?
People confuse goals with dreams and wishes. Dreams and
wishes are nothing more than desires. Desires are weak. Desires become strong
when they are supported by:
That is what differentiates a desire from a goal. Goals are
dreams with a deadline - and an action plan. Goals can be worthy or unworthy.
It is passion, not wishing, that turns dreams into reality.
Why don’t more people set goals?
1. A pessimistic attitude - always seeing the pitfalls
rather than the possibilities.
2. Fear of failure - What if I don’t make it? People feel
subconsciously that if they don’t set goals, and if they don’t make it,
then they haven’t failed. But they are failures to begin with.
3. A lack of ambition - This is a result of our value
system and a lack of desire to live a fulfilled life. Our limited thinking
prevents us from progress. There was a fisherman who, every time he caught a
big fish, would throw it back into the river, keeping only the smaller ones. A
man watching this unusual behavior asked the fisherman why he was doing this.
The fisherman replied, “Because I have a small frying pan.” Most people
never make it in life because they are carrying a small frying pan. That is
4. A fear of rejection - If I don’t make it what will
other people say?
5. Procrastination - “Someday I will set my goals.”
This ties in with a lack of ambition.
6. Low self-esteem - Because a person is not internally
driven and has no inspiration.
7. Ignorance of the importance of goals - Nobody taught
them and they never learned the importance of goal setting.
8. A lack of knowledge about goal setting - People don’t
know the mechanics of setting goals. They need a step-by-step guide so that
they can follow a system.”
For more insights into Goals and SMART goals, catch up with
me next time or contact me at Christina. [email protected]
Until then, have a great week!
The Doctor's Consultation by Dr. Iain
Corness: Great Expectations
by Dr. Iain Corness
No, this is not an article on waiting for your next
generation to appear after nine months, this is more of an article on what to
expect as a patient in a foreign land. At my office in town, I will often
receive ex-pat patients, all clutching a large plastic bag full of brightly
coloured pills, and saying, “Which ones do I HAVE to take, Doc?” They will
also say that they do not understand because they did not get so many tablets
or medications when they went to see the doctor in the western world, so why
do they get so many here? Is it that the local doctors don’t know what the
diagnosis really is and what they should have, so they give them a little of
The answer to all this is in the differing expectations of
different cultures, and nothing to do with training, expertise or
‘blunderbuss therapy’. When I worked in Spain I noticed that all the
patients would bring a bottle of urine with them to the clinic. This seemed to
have no bearing on the presenting symptom in any way whatsoever. Fortunately,
I mentioned this quite early in the piece to a senior colleague, who told me
that the Spanish people ‘expected’ me to examine the urine, and if I
didn’t they felt ‘short-changed’ after the consultation. The examination
was not expected to be microscopic, but a simple holding of the bottle up to
the light, with a sage muttering of “Orina bien” (pee looks fine) was all
that was necessary. Expectations had been fulfilled.
In Thailand there are also cultural expectations, and again
these are not western ones. Probably more through a ‘value for money’
concept, the Thai people expect to get their large bag of pills, tablets,
capsules and potions. If they don’t, they feel ‘short-changed’ just like
their Spanish cousins. Their ‘expectations’ have not been met.
In the west, it is different. If you had not noticed
before, compare the prices of the medications in western countries, with their
cost here. Sure, some of the drugs are ‘copy’ drugs made here or in India,
with or without license, but they are much cheaper. Even in Australia, with a
subsidized pharmaceutical benefits scheme, costs are in the main much higher.
The thrifty Australian patient then only wants to buy those medications that
are absolutely necessary for his ailment. Paracetamol painkillers, he will buy
in small quantities himself when needed, and at the local discount supermarket
too. He does not need the doctor to expensively prescribe these to be
purchased on prescription at the friendly neighbourhood chemist, to help keep
the chemist’s Porsche in fuel, oil and rubber. ‘Expectations’ at the
opposite end of the spectrum from the Thai expectations.
Now the following may come as a startling fact to many
ex-pats. This country we live in is called Thailand and the inhabitants are
called Thais. This is not England or New Zealand or Holland or Lapland. I
repeat, it is Thailand. The medical delivery system in this country has
evolved to cater for the needs of the vast majority of its inhabitants. The
Thais! Not the farangs.
So where does that leave us farangs? Well, some of the more
enlightened private hospitals with international departments and
internationally experienced doctors do understand the cultural differences and
thereby cultural expectations, and try to accommodate our strange western
ways. The others will give you a large bag of pills! So now you know!
I have only just noticed that you published my letter
regarding Caring Chris (issue 10th May). Problems with GF all sorted out
now as she has a very generous (“jai dee”) German sponsor, but still
she insisted on calling all of our mutual friends to find out what I was
doing where I was staying etc. Thankfully none of our mutual friends
furnished her with any information whatsoever (or so they tell me).
Apparently now she also travelles (sic) a lot Hong Kong, Singapore. A
damaged soul. Funnily enough I managed to loose (sic) my “keenow” self
and blew circa 200,000 bhat (sic) on wine woman and song. Never had any
problems with girls getting possessive all of ‘em knew I was a butterfly
who “put Thai geng mackma” didn’t bother them in the slightest. Only
problems I had this trip was the fact that most of my companions didn’t
get much sleep due to my ogre like snoring. Have you any suggestions on
how I might solve this problem as I will be back in the land of smiles in
about 6 weeks and would like for my companions to get a little bit of
sleep and not be woken up at 4 in the morning with complaints. By the way,
my previous letter to yourself was penned at about 4 in the morning after
consumption of various different alcoholic substances which left my
spelling a lot to be desired. As I’m typing this I am trying to get over
the hangover of all hangovers as well as my Jet Lag so apologies for my
spelling yet again.
Dear Not Anon,
Yes, I do remember you very clearly (and your
abysmal spelling, which as you so correctly point out, is no better). You
were the generous gentleman who bought your girlfriend a pair of glasses
and the odd movie ticket in something like three years. Ah yes, the very
heart and soul of munificence, my Petal. And then you wanted to know how
to tell her you didn’t want her any more. She was one lucky girl, and
now with a truly generous sponsor who helps her fly around the world.
Lucky girl, in more ways than one. A damaged soul? Why would you say that?
Though I must admit jet planes do play havoc with one’s skin. I always
use lots of moisturizers. But back to you and your snoring problem. I
notice that 4 in the morning seems to be a very bad time for you. Snoring,
complaints from companions, letters written while under the influence, or
written while getting over hangovers after having been under the
influence, jet lag and goodness knows what else. I would strongly suggest
that you remove the “4” from the clock and go straight from “3” to
“5” and all your problems will be over.
Here is a print of the painting I did of the imaginary
you sharing a bottle of vintage champagne with the half-wombat at an
exotic tropical lounge on the beach. Please don’t be prejudiced towards
half-wombats, they have good hygiene, their fur smells good and although
easily aroused, are generally delightful companions. This scene shows you
enjoying a little affectionate horseplay with the half-wombat. In
addition, while engaged in the wombat-play, you are performing an
advanced-precision adopted rhino control technique in which you
rhythmically dangle your right shoe from your toes in a hypnotic fashion,
causing the young orphan rhino to remain calm and motionless. In the lower
left, a lady server person is bringing a box of excellent Estonian
chocolates to your table next to the half-wombat’s dad. In the middle
sits a heavily damaged computer, attacked by a hacker, while an anxious
Frisbee dog waits for you with an alien guitarist. The upper left of the
painting is occupied by Death on a break, next to the Hen of Happiness,
which is looking over your shoulder. I was gladdened to hear you don’t
have tattoos, but saddened because you seem to indicate that healthy
exercise and diet are not included in your program - it’s never too
late! If you use any of my art in your book, I think at least you should
give me an ex-pat discount or some chocolates!
Dear Dickens 44,
Thank you for your print, the detailed explanation
(which I had to shorten, I’m sorry) and the ‘new-age women’s candy
bar’, which I have to unfortunately tell you tasted like a dog biscuit,
or perhaps something one would feed to half-wombats! Despite that, I must
admit I did devour the 180 calories and cholesterol free candy in one
sitting. I must also take you to task on the hygiene and smell aspect of
these half-wombat animals. Your half-wombats must have different other
halves to the ones I have seen, Petal. Disgusting! The dangly bits are so
untidy. Be assured that if any of your art finds its way onto the pages of
my embryonic book, you will receive ample credits and a ‘new-age men’s
candy bar’ as well!
Camera Class: Scale the heights!
by Harry Flashman
For many camera owners, getting their snaps back from the
photo-processors is a time for mixed emotions. 90% disappointment and 10%
frustration. If that includes you, read on!
Note that I said “camera owners” because there are far
more owners of these costly devices than there are dedicated enthusiasts. This
was really hammered home to me the other day when I loaned a camera to someone
who needed to take some shots at a function, and whose own point and shooter had
just died. My camera that I loaned out was a Nikon FA, the only one in my camera
bag that had an “auto” setting. There was not enough time to teach a
fully-auto camera user the complexities of aperture and shutter speed
Next problem was focussing - today’s user has been raised
on auto-focus, so there was a quick lesson needed there. Next was loading (no
auto-wind on) and unloading (no auto-rewind). Unfortunately, the FA, whilst
still being an excellent work-horse in an enthusiast’s hands, is a dinosaur
and an impossibility for today’s amateur photographer.
So why with all these great features on today’s cameras,
are today’s photographers disappointed with their results? Quite simply
because the problems are no longer technical woes, but are “artistic”
problems. You see, the one thing the camera cannot do for you (yet), is to
“see” the final result in its electronics and crop, move, tilt, move in,
move away automatically to get the pleasing end product. However, this week, I
will help. Continue reading!
Take a look at the first photograph with the article. It was
taken at Ayutthaya in the middle of the day (worst time) and was taken at the
request of the young lady to have her photo taken in front of the temple ruins.
I positioned the camera so that I could get the entire monument in the frame,
from the spire to the base, plus a little foreground, and then asked the subject
to walk towards me, so that I could make her the ‘hero’ (or I should say,
heroine) in the shot. She was shy and wanted to stay where she was, so I took
the shot anyway, knowing that as a human portrait study it would be
disappointing - but also knowing that as a shot of the monument, it would work.
Why? Because this shot would demonstrate scale. This shot would show just how
tall the edifice really was, by being able to compare it to a human being of
If you don’t believe me, place a thumb over the figure and
look at the shot of the ancient structure again. How tall is it? How small is
it? You have no idea, without someone or something to compare it with.
So today’s great tip is that when you are photographing
some ‘thing’, include some other ‘thing’ that is recognisable which can
then show the comparative size. For buildings, a person is wonderful, because we
all know how tall we are! For small objects, you can always include a cigarette
lighter, a beer glass, a teacup - get the idea? Something well known that will
show comparative size. Take a look at advertising brochures - they will very
often have a common object included, so that you can judge just how “large”
the large economy size really is! The second shot of the Chinese food is a
classic example of this. By including the menu in the shot, the viewer can see
that this is a large dish of food!
So always remember, that when you want to show “size” include an object
whose size you can compare to. Simple!
Recipes from Rattana: Khao Pad Gai
Thai fried rice is a very simple dish that you can have cooked for you on
any street corner. The choice of meat is open, and prawns or squid can also be
used. The one chosen for this recipe was chicken, probably the most usual. The
secret with this dish is to use the steamed rice left over from yesterday which
you have stored in the refrigerator. Do not use hot steamed rice.
Ingredients serves 2
Cooked long grain rice 2 cups
Oil 1/2 cup
Chicken (bite-size pieces) 1 cup
Fresh eggs 2
Chopped onions 1/2 cup
Chopped tomatoes 1/2 cup
Ketchup 2 tbspns
Maggi sauce 2 tbspns
Shallots, cut 2 cm pieces 2 tbspns
Chopped coriander leaves 2 tbspns
Cucumber 10 slices
Sliced fresh chillies 2 tspns
Lime juice to taste
Fry eggs in oil to desire firmness. Remove from oil and set
In the remaining oil, fry onions with pork or chicken pieces
over high heat until cooked. Remove the meat and onions and set aside.
In the remaining oil, combine the rice, chopped tomatoes,
ketchup and Maggi sauce and mix well. Return the meat and onions to the rice
and heat through.
Transfer the fried rice to a plate and sprinkle shallots, coriander leaves,
chillies and lime juice. Top with fried egg and place cucumber to one side.