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Wealth Succession Planning


Sonali Pradhan is Managing Director, RBS Financial Services (India) Pvt. Ltd., a part the Royal Bank of Scotland Group.

Sonali has over 14 years of experience largely in the banking industry. Prior to joining the RBS Group, she was Associate Director at Warmond Trustees & Executors Pvt. Ltd. assisting High Net worth Individuals with estate planning solutions.

Intergenerational Wealth TransferGiven the dynamics of wealth creation in the past two decades, Indian households have witnessed some of the largest absolute gains in wealth in the world. This wealth creation is not restricted to business households but many individual professionals have also appeared in the top earners list.  Alongside this wealth creation, we are also poised to witness one of the largest wealth transfers in the history.


However there is lack of awareness and pro-activeness in planning for such wealth transmission process. Many are not aware about the implication of passing away intestate which means dying without writing a Will.


There are personal laws based on the religion of a deceased individual, which defines the successors in case of an intestate death. While it is the legal heirs who will inherit the wealth in this process, the proportion in which the wealth will be inherited may not represent one’s wishes. Additionally the heirs are required to complete lengthy legal formalities to get an access to the wealth, let alone the disagreement between the legal heirs.


Fortunately there is some awareness about the Will amongst the households. “Will” is the most easy and effective document in the succession planning process. One can define the beneficiaries and their share in the estate in the Will. Details of assets and the beneficiaries written down on the plain paper witnessed by two individuals with self attestation are sufficient to create a valid Will. However the main limitation of a Will is that it can be challenged. Additionally, depending on the state in which one passes away and has estate in, the beneficiaries need to complete the legal formalities before inheriting the assets.


Typically a Will if complimented by nomination and appropriate joint tenancies can make the succession process seamless. It is important to note here that a nominee is merely a custodian of an asset except in case of the shares. The financial institutions hand over the corpus of a deceased investor to the nominee who is required to distribute it amongst the legal heirs or the beneficiaries of a Will. Nomination does not award a title but is useful to get immediate access to the wealth. Hence whether one writes a Will or not, one has to ensure appointing a nominee for all the assets.


Succession PlanningPRIVATE TRUST is another way in which wealth succession can be planned. A trust can be set up during one’s lifetime or upon one’s demise. Similarly the assets can be gifted to the trust during or after the lifetime. Depending on the desired control, the gifts can be revocable or irrevocable.  The person setting up such a trust is known as a Settlor and he/she defines the beneficiaries to these assets, the age at which an asset will be transferred to them or any other condition for a transfer. The settlor appoints the trustees to manage the assets who are responsible to distribute them to the defined beneficiaries. A transfer of assets to the beneficiaries is relatively seamless and dispute free process in case of a trust. But the success of a trust depends on the trustees and clauses defined in the trust deed. 


Whether it is a trust or a Will, one needs to first note down all the assets and liabilities. It is important to understand the needs of the beneficiaries and their situs. Contingencies are also to be considered while planning such transfer. The wealth transfer is not always related to demise and one may chose to transfer a part of a wealth during one’s lifetime. 


Another important aspect in wealth transmission is to consider the name in which the asset is held. One may hold the assets in an individual name or a corporate structure, a partnership firm, a sole proprietary firm or HUF. In case of corporate structures, the shares can be bequeathed and not the assets of such corporate. Similarly the partnership capital can be bequeathed. In case of HUF assets, the coparceners automatically become the successors. Post a legislative change in 2005, daughters are also considered as coparceners, even after being married.


Lastly it is important to review the wealth succession plan, just the way an investment portfolio is reviewed. Depending on the death, marriage, divorce or birth, one may need to change the plan. Seeking a professional assistance in this process is also recommended.


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Prasad Barje

Please provide me the details of succession planning course / CTEP

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