As the world is evolving at a faster pace, so is the financial markets evolving and so is the definition and component of wealth changing for the modern man. Today, the term ‘Wealth’ includes financial products such as mutual funds, stocks, shares, bonds, PMS, AIFs, REITs, venture funds etc.
The majority of the high-net-worth individuals (HNIs) have their money parked in such financial investments along with business holdings, immovable properties in India and overseas. The wealth that HNIs have accumulated over these many years from their toil, does deserve a serious thought for its preservation, growth and transfer or transmission to their next generation. The shift of wealth and investment instruments from tangible to the virtual character and from domestic to global wealth requires innovative ways for its smooth and seamless succession.
How is seamless succession possible if well-meditated efforts are not made and not given a serious thought! The world at large has been a witness to long-lasting legal battles on account of absence or improper planning of wealth and its succession.
The Government has laws in place for the welfare of all, and the laxity of people in valid usage of such welfare laws has led the courts to address their disputes, which has taken the colour of legal complexity rather than lawful welfare.
Today, there exist disputes in relation to properties and assets which has created bitterness amongst the family members. People who are industrious, have been left out of the benefits of their efforts. The major reasons for this are false and selfish contestation of the right to the properties and sometimes ignorance about one’s inheritance.
The right way to avoid such allegations on the person who deserves to be an ‘heir in deed’ and to ‘rest in peace’ after one’s demise, one must take action now. A relatively secured way to protect the HNIs and their wealth for a well-thought, well wished and welfare-intended succession is the creation of a Trust (Private or Charitable), depending upon one’s desires. The solution of creating a ‘Trust’ may at first sound to be complex.
However, if one thinks of the creation of ‘Company’, it seemed complex centuries ago. Today, Corporates play a dominant part in one’s life which owns and manages the business wealth across generations for all its stakeholders.
The creation of ‘Trust’ is not a day’s job. The diaspora of Indian HNIs and Indian origin is so vast that, today, Indians have families across the world. Many families have vast geographical split i.e. the parents may be staying in India and their children abroad with or without the intention of returning to their home country. In such cases, the best way to plan for succession of private wealth and provide for all probable and thinkable uncertainties is the creation of a ‘Trust’.
A ‘Trust’ is a separate structure, different from the individual but a most reliable vehicle to carry out existing as well as future wishes. Properties belonging to the ‘Trust’ set up by individual/s (the Settlor) can be governed and used in the way Settlor instructs. Its management can be done in a professional and independent manner by trusted individuals referred to as ‘Trustees’.
The benefits of the properties of the ‘Trust’ would be enjoyed by the ‘Beneficiaries’, who could be family members, under-privileged, or the public at large, depending upon the nature of the ‘Trust’ whether its Private or Charitable Trust.
Succession planning is a necessity and not an option and this awareness has emerged quickly during the Covid-19 pandemic. Succession planning is not only a means to safeguard from potential inheritance tax but also a method to ensure that legacies endure and sustain with changing times with minimum conflict or impact on family business and private wealth.