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digibum

Pros/Cons Usufruct vs Thai Company

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55 minutes ago, digibum said:

Also things like claiming spousal social security benefits when she's eligible and so on. 

Yea, my wife's social security benefits were a big concern to me. She did work in the USA more than ten years so she earns her own benefits. I haven't looked into it for a couple of years but there is a five year and a ten year test which determine eligibility. 

 

My wife passes both of the time tests. To collect USA social security in Thailand you apply through the Social Security office at the US Embassy in the Philippines. Should I pass before I/she applies then the Thai Attorney will help her complete the application.

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6 hours ago, digibum said:

 

This is pretty much the plan.  I am just trying to get an idea of what the obvious pros and cons might be and see if I'm missing something.  Obviously, I would consult with a lawyer before going either route to make sure all of the i's are dotted and the t's crossed.  I don't want either myself or my wife to get some shocking news when one of us dies. 

 

It's also helpful to see the various advice given because it helps form the questions I can ask the lawyer. 

 

Often times, you can read about a lot of this stuff, but some minor twist in your circumstances changes everything.  For instance, I don't think I read anywhere that a husband and wife could not enter into a usufruct.  There seems to be some debate about that, but I had no idea it was even a question. 

I have never heard that before, that  a husband and wife couldn’t enter into a userfruct as I would have thought they would be the people who most commonly use the provision.

I have three userfructs on three different properties

 My wife also has a userfruct with one of our Farang friends as he isn’t married.

We have used an excellent Thai lawyer for over fifteen years and she has told me that some Land Offices do try to apply their own interpretation of the law and that on occasions “she has had to pull them into line”

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On 2/19/2020 at 2:08 PM, GalaxyMan said:

The title of your post mentions usufruct, yet you only talk about leasing. To the best of my understanding, a spouse cannot give a farang an usufruct; a lease, yes.

Another urban legend.


In my specific case, the usufruct for life was granted on my only name, my wife being the legitimate owner of the land.
In the event of a divorce (very unlikely) I would remain the only official occupant of the premises, up to my death.


A contract which specifies these modalities was drawn up by a lawyer and validated by my wife, myself and the administration.
It was the land office imself who advised me this formula.

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Concerning Usufruct, you’ll need to check if your province will issue usufruct servitude to a foreigner, or to a foreign husband. Usufruct means “a permission to harvest the fruit of the land”, not really as cover for a foreigner to live in a house.

 

We often see posts about that any contract between husband and wife can be declared void – especially in case of divorce, but could also be by heirs in case of death – so using a usufruct, then the registration of servitude at a land office should be done before any transfer of land into a wife’s name, so the granter of the usufruct is someone else than the wife, and the servitude just follow the land after transfer.

 

Usufruct running until one’s death always makes me think about that in Thailand it’s best, if one is worth more alive, than dead...:unsure:

 

Another possibility is “right of habitation” servitude, which can run both for a limited period of time, but not exceeding 30 years, or run for life; but again, be aware of what I mentioned above.

 

My thoughts about your idea of having a lease, and if your wife die, selling the land for another 30-year lease.

You would firstly need to have you wife to make a last will, where you are sole heir to the land. If there is no last will, you can only have 50%, and then your plan is not working. The new landowner will give a new 30-year lease, but you should check with a solicitor that this will work, and not being considered as a trial to extend a former 30-year period of that particular land beyond 30 years, which is illegal. You can extend a lease, but you cannot extend a lease beyond 30 years; re your comment about renewing it every 5 years, the maximum legal duration is 30 years, and if any longer period is agreed, it shall be reduced to 30 years.

 

If you buy an empty land – or with permission remove and old construction – and build a new house, you can legally be the owner of the house. For that you can use superficies servitude. This will run together with another agreement for using the land, which could be usufruct, or could be a lease agreement. Having the house separated from the land could make it more interesting if later sold to another foreigner.

 

Using a Thai company limited, as landowner – and you can still build a new house and own it – is the most costly solution, but might in some cases be safer than ownership in a Thai individual’s name.

 

Even often mentioned in forum posts, there has so far not been legal action against minor companies as shell-owner a smaller private house. The few public known actions against nominee shell-companies has been against larger projects. A major change in company limited ownership was the elimination of nominee shareholders, when the number of shareholders were reduced from minimum 7 to 3 only, and at same time the Thai shareholders should show proof of funds. That shall be understood as, you need minimum 3 shareholders, and minimum 51 percent of the registered company capital shall be own by Thai nationals (or juristic persons), and they shall prove that they could afford to buy their shares. Some land offices will however not allow land registration to a company limited with more than 39 percent held by foreigners, which however often can be arranged by share transfers before, and after land registration.

 

Your thoughts about your wife as major Thai shareholder, her shares will in case of death be included in her estate. Again a last will is needed for how that shares shall be divided among the heirs. You need to talk to a solicitor if you legally can be heir; and if yes, within how long time you need to sell or transfer the shares, as you cannot own a majority post.

 

Procedures, and how rules are implemented, can be slightly different from province to province, so always use a local solicitor with experience in dealing with land and property.

 

Preferred shares can be used for control of company limited voting right – the method often used by Scandinavian public limited companies, where the founding family keeps controlling the company with a minor share position – even it might not be the intention of the law; however, I have not heard about any cases so far about challenging the use of preferred shares.

 

A real con for using a company limited as owner is the costs, which can be up to around 40,000 baht a year for tax accounting and auditor, plus often a minor company tax. The company will need to make a lease agreement and fees have to be paid; anyway some money needs to get into the company to cover the expenses. You can keep the fees low, by build and own any constructions on the leased land (see some of the other threads with advises about how to be owner a new build house).

 

A real pro when using the company limited method – which however might not be in your situation – is that you don’t sell the property, you sell shares in the company. Land transfer, and taxes and fees are avoided. Another benefit is that partial offshore payment for shares is an option.

 

My solicitor, an expert if Thai property, mentioned that one could declare loan servitude on the registered property – like a mortgage – which would work as security, because the property (land) cannot be transferred without the loan being fully paid. However, again be aware of any agreement between husband and wife, which are said that could be declared void.

 

The good old advice “never invest more in Thailand than you can afford to loose” often makes sense. Always consider options in worst-case scenario, and plan for longer future possibilities than the nearest tall building.

 

Reminds me of a huge sign in a bar, funded by farang-money: “Thai ladies has been voted as the best housekeepers in the World – you buy, they keep.” The sign is gone now, so is the farang that paid for the bar...:whistling:

 

I wish you good luck with your future retirement in Land of Smiles…🙂

PS: For your info, I’m owner of a house on rented land.

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1 hour ago, The Man Who Sold the World said:

Yea, my wife's social security benefits were a big concern to me. She did work in the USA more than ten years so she earns her own benefits. I haven't looked into it for a couple of years but there is a five year and a ten year test which determine eligibility. 

 

My wife passes both of the time tests. To collect USA social security in Thailand you apply through the Social Security office at the US Embassy in the Philippines. Should I pass before I/she applies then the Thai Attorney will help her complete the application.

 

My wife did work in the US, even got US citizenship, but she didn't work 10 years, so she'll be piggybacking on mine.  Which is better anyway, half of my benefits will be more than 100% of hers due to the wage gap between us. 

 

Interesting on the Philippines application.  I always just saw the phone number on the SS website and figured that's where I would start when I got old enough. 

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55 minutes ago, khunPer said:

The new landowner will give a new 30-year lease, but you should check with a solicitor that this will work, and not being considered as a trial to extend a former 30-year period of that particular land beyond 30 years, which is illegal. You can extend a lease, but you cannot extend a lease beyond 30 years; re your comment about renewing it every 5 years, the maximum legal duration is 30 years, and if any longer period is agreed, it shall be reduced to 30 years.

 

Thanks for a lot of very detailed info.  Very, very helpful. 

 

On the quoted section above, I was under the impression that I could terminate the original lease.  So, I was thinking this prevents it from being viewed as an extension of a lease.  First least was terminated after death or lessor, assuming I inherit the property per the will, I then own 100% of the property (without a current lease) and have 1 year to sell.  Then I can sell it to any Thai national for pennies on the dollar if they agree to a 30 year lease, which would be an entirely new lease since the previous one had already terminated. 

 

In actuality, I would probably wouldn't sell it to some random Thai person, but maybe my wife's nephew who she would want to get it after my death anyway. 

 

Also, per your above, it sounds like maybe I was using the wrong term of extending the lease.  We would need to jointly terminate the previous lease and initiate a new lease (and obviously pay the fees associated with that)?

 

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2 hours ago, digibum said:

 

Thanks for a lot of very detailed info.  Very, very helpful. 

 

On the quoted section above, I was under the impression that I could terminate the original lease.  So, I was thinking this prevents it from being viewed as an extension of a lease.  First least was terminated after death or lessor, assuming I inherit the property per the will, I then own 100% of the property (without a current lease) and have 1 year to sell.  Then I can sell it to any Thai national for pennies on the dollar if they agree to a 30 year lease, which would be an entirely new lease since the previous one had already terminated. 

 

In actuality, I would probably wouldn't sell it to some random Thai person, but maybe my wife's nephew who she would want to get it after my death anyway. 

 

Also, per your above, it sounds like maybe I was using the wrong term of extending the lease.  We would need to jointly terminate the previous lease and initiate a new lease (and obviously pay the fees associated with that)?

Thanks for your reply.
I cannot comment further on your questions, as I don't know a right answer; you really need to consult a solicitor with experience in property and inheritance.

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11 hours ago, Pib said:

Was married (and still married) when the Thai wife and I bought our house/dirt here in Bangkok and I have a Usurfruct on the chanote.

Me too in Pattaya, they did not want to do the usufruct and the fist bloke tried to say it was not available and also tried to charge extra money but I simply went back another day and spoke to another officer there and was all done for a minimal cost ?B60...

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I find it important to note that all these options can be combined and even be combined with pseudo holding structures.

 

You can have a usufruct, superficies and a company all at the same time, obviously.

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On 2/20/2020 at 8:21 PM, mark131v said:

Me too in Pattaya, they did not want to do the usufruct and the fist bloke tried to say it was not available and also tried to charge extra money but I simply went back another day and spoke to another officer there and was all done for a minimal cost ?B60...

How long ago as I heard that they stopped allowing them completely - this was from a lawyer. They would not have had an axe to grind as I already had one.

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1 hour ago, topt said:

How long ago as I heard that they stopped allowing them completely - this was from a lawyer. They would not have had an axe to grind as I already had one.

Reckon would have been about 2013 so guess it could have changed but as I said the first bloke we spoke to was adamant you could only get a 30 year lease and I can't remember but he wanted a few thousand to do it

 

I had checked on here and read all the threads so was sure we could do it so waited a few days and went back and this time made sure we got someone different and had no problem at all getting it sorted

 

Earlier somebody mentioned it's like banks and tbh that is exactly what I have found with this, it's all about little fiefdoms who make their own rules because they are often too dim, lazy or prejudiced to do their jobs properly

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