Succession and Estate Planing in Thailand

The Civil and Commercial Code provides that in circumstances where no will is provided (or a will is provided but held invalid), an estate is distributed among what are called ‘statutory heirs.’ There are six classes of statutory heir and each class is entitled to inherit in the following order of preference:

• Descendants
  
• Parents
  
• Brothers and sisters of full blood
  
• Brothers and sisters of half blood
  
• Grandparents
  
• Uncles and Aunts

No heir in any lower class is entitled to inherit in the event an heir of any higher class survives. However, a spouse is treated as a special class entitled to inherit in a proportion that varies between an equal and a full share of any estate dependent upon the existence of the remaining surviving classes in any particular circumstance.

In circumstances where the deceased left a valid will, an estate will generally devolve on the named beneficiary or beneficiaries. The most straightforward form of will is a simple will where two witnesses are required to be present when the will is executed. This is the type of will we generally recommend to our clients to ensure their wishes are carried out.

In order to be valid, a will primarily must be made by a testator who is:

• A natural person (as opposed to a juristic person)
  
• Not acting under the effects of mistake, duress or fraud
  
• 15 years or older
  
• Not incompetent or of unsound mind

Irrespective of whether or not a deceased left a valid will or died without leaving a will, an estate administrator will need to be appointed by the Thai court in order to practically distribute an estate of any significant value.

A petition is filed with the provincial court having jurisdiction over the area the deceased was domiciled at the time of death. The petition must be filed by an heir, an ‘interested party’ (e.g., a nominated administrator or a creditor), or by a public prosecutor.

Following the filing of a petition, the court will set a date for the hearing of evidence by the petitioner and, if satisfied, will render an order allowing the petitioner to administer the estate either in accordance with the deceased’s wishes or, in the absence of a valid will, in accordance with the statutory rules above. The process generally takes approximately 90 - 120 days from the date of filing the petition but can take significantly longer if contested.

As in many other jurisdictions, the manner in which an estate is ultimately distributed in the absence of a valid will may be undesirable or even contrary to the wishes of a potential testator. In the event our clients own property in Thailand, our advice is always to ensure the proper draft and execution of a will that accords with Thai law specifically in relation to that property.

This is not only to ensure the estate is distributed in accordance with the client’s wishes, but to avoid any issues with validity or enforceability in the Thai court which plays a significant role in the distribution of any valuable estate. Any property held outside Thailand should generally be dealt with in a separate will that complies with the rules of the jurisdiction in which it is located.

Other important considerations that should be taken into account include:

• The provision of trusts, which are not enforceable as a matter of Thai law and are a common source of issues when attempting to enforce provisions of wills drafted in accordance with the rules of a foreign jurisdiction.
• The identity of an executor or administrator whose role should be made explicit in any Thai will. The expectations and obligations of the role should be made clear to any executor in advance, particularly if they do not reside in Thailand, since they will need to physically attend the Thai court. The naming of a substitute executor is also good practice.
• While a Thai will does not need to be written in Thai to be valid, it will need to be professionally translated and officially certified before it is submitted to a court along with any petition to appoint an administrator. With this in mind, we draft and execute Thai wills for our clients simultaneously in Thai and English.

The Inheritance Tax Act B.E. 2558 (2015) provides that the following persons are subject to inheritance tax:

• Thai natural persons
  
• Non-Thai natural persons domiciled in Thailand
  
• Non-Thai natural persons inheriting an asset(s) located in Thailand
  
• Juristic persons (companies) registered in Thailand which are majority Thai owned or managed
  

There are important exemptions from the Act, the most significant being the following:

• Inheritance that does not exceed 100 million Thai Baht in value
  
• Being a legal spouse of the deceased
  
• Being a recipient of an inheritance where the deceased passed away before the enforcement of the Inheritance Tax Act (1st February 2016)

In the event the value of an inheritance exceeds the threshold of 100 million Thai Baht, only that part which exceeds the threshold will be subject to inheritance tax. The rates are as follows:

• 5% for parents and descendants
  
• 10% for all other beneficiaries

The following assets are subject to inheritance tax:

• Immovable property
  
• Securities as defined by the law on securities and exchange
  
• Deposits or any other monies with the same characteristics capable of being withdrawn or claimed from a financial institution or person who has received such monies
  
• Registered vehicles
  
• Financial assets prescribed by Royal Decrees

It should be noted that even in the event an estate is not subject to inheritance tax, there may be other tax issues that need to be addressed, particularly with regard to the sale of assets and the transfer of funds out of Thailand.

Succession and estate planning in Thailand is a potentially difficult and complex space, especially when there are multiple legal jurisdictions and foreign persons or other legal entities involved.

Our lawyers have years of practical experience in dealing with precisely these kinds of issues and providing clients with expert advice and guidance. Please contact the LAFS property practice at info@lafs-legal.com  if you need assistance with any of the following:

• Estate planning or the draft and execution of wills in accordance with Thai law
  
• Assistance with the estate of a relative who has passed away in Thailand
  
• Applying to the Thai court for the appointment of an administrator or executor (a process sometimes referred to as a grant of letters or probate in foreign jurisdictions)
  
• The conduct of those applications, including the preparation of an applicant to give evidence at any hearing
  
• Contested wills or challenges to the administration or distribution of an estate
  
• Assistance in dealing with banks, the land office or other institutions during the distribution of an estate
  
• The preparation of estate accounts and the practicalities of the distribution of an estate to beneficiaries

Advice on inheritance tax issues or any other tax issues related to the distribution of an estate and the transfer of proceeds outside Thailand