Inheritance” Matters to All of Us

Article by: Nipapan Poonsatiansup CFP®


 It’s a common misunderstanding that inheritance reserved only for the riches and it doesn’t concern them. This misperception should be corrected because it matters to anyone, not just wealthy people with many assets. Planning for inheritance is important and should never be overlooked, regardless how much asset you possesses.

Inheritance planning is a plan to handover your assets to your heirs properly and efficiently. The following are the reasons why: 

  1. To make sure assets are passed on precisely as planned, especially for business owners who have many successors. Inheritance should be explicitly planned  and detailed of what and who should receive a particular asset to maximize its benefits.
  2. Streamlining handover processes efficiently and in a timely manner. Without a good planning, times are wasted on the formality of court order to appoint an executor. There are potentially lawsuits between beneficiaries to nominate themselves as an executor. Consequently, household cashflow would stalled if owner of assets was a head of family or a sole breadwinner.
  3. Tax planning to manage payable inheritance or gift taxes.

Follow the preparatory steps for inheritance planning:

STEP 1: Start from making a list of your assets and liabilities

Being aware of your own finance, properties or liability will make it easier to allocate your budget for retirement, debt repayment and a portion to pass on to chosen successors. When planning or drafting an estate while the asset owner still alive, consider taxation payable of properties such as real estate, vehicles, securities, cash or cash equivalents and other assets that exceed tax threshold as specified by laws.

Another method used for inheritance planning when an asset owner passed away is an estate planning. The estate planning involves management of business, house or land and other type of assets. An estate planning required a list of specific assets and its beneficiaries. Once estate owner dies, an assigned lawyer will enforce the estate and distribute all properties to designated beneficiaries accordingly. If a descendent inherited debt, liability must be settled out of the estate and nothing more

STEP2: Study laws related to inheritance taxation and gift taxation

The principle of maximizing inheritance are:

  • Estate tax incurred when assets passed on to beneficiary after the decedent’s death.  Inheritance assets are subjected to taxation by law. For example, according to the law enforced in 2017, the tax-free threshold is 100 Million THB, any exceeding amount is subject to inheritance tax of 10% for non-related recipients and 5% for ascendants/descendants. The values of taxable assets are calculated from estimated price for real estate and closing price of transfer date for securities. 
  • Gift tax incurred when properties are transferred to successor when owners are alive. Gifts are divided into movable properties and immovable properties. Gift value exceeding a specific amount stipulated by law is assessible for personal income tax. The following are the examples of 2017 Tax law.
    • Movable properties gifted to non-related recipients, any amount exceeded 10 million THB is subjected to 5% tax and 5% of taxable portion of any amount exceeded 20 million THB when the gift given to lawful heirs or relatives out of affections.
    • Immovable properties gifted to lawful descendants excluded adopted children are subjected to 5% tax of an asset value portion that exceeded 20 million THB.

STEP 3: Inheritance transfer planning

Annually transfer partial assets in the amount that could minimize inheritance tax rate. The inheritance transfer should be thoroughly planned. Prevent potential conflicts and avoid passing on a single property to many inheritors. And do not transfer all your assets just to escape taxation and suffer the consequences when you exhausted all assets.

STEP 4: Consider transfer inheritance that get tax benefit

Life insurance is another tool for inheritance planning. A planer can identify on their insurance policy the beneficiary to give the last piece of asset. The death compensation from life insurance is not a taxable income. The beneficiary can collect money right after the death of policy’s holder because life insurance benefits are excluded from estate settlement.

Planning for inheritance is the easy way to ensure your assets are transferred to your love ones. Most importantly, plan ahead while you are alive for your own peace of mind.