Succession planning: Will easy to make, but Trust more robust, say experts

UHNIs should make succession planning top priority

In a recent survey conducted by Knight Frank, 30 per cent of the Indian ultra-high networth individual (UHNI) respondents said transferring wealth to the next generation is among their top three priorities. 

While UHNIs place a lot of importance on estate planning, every individual with assets should undertake this task, especially in the backdrop of the pandemic.

Estate planning refers to how a person wants her wealth and other possessions to be distributed after demise. Niraj Kumar, partner, DSK Legal says, “This can be done by executing legal documents such as a will, power of attorney (PoA), etc, and through acts such as appointing nominees and granting joint ownership.”

Make an inventory of your assets: Begin by making a list of your key assets. Aditya Chopra, managing partner, Victoriam Legalis-Advocates & Solicitors, says: “List all the things that can be treated as an asset, such as properties, vehicles, antiques, jewellery, etc. Then list financial assets such as funds, policies, etc,” and finally, things to which you have sentimental attachment, like special paintings, artefacts, family heirlooms.

The inventory should include your debt. Make a plan for what should be done about it after you are gone.  

Handpick your people: Think carefully about who should get which of your assets. You also need to appoint people who will carry out key tasks on your behalf. Handpick your personal representative, also known as the executor. This should be someone you can trust to carry out your wishes in your absence. 

You should also appoint someone to act as guardian to your minor kids and pets.

Next, select a person to whom you will grant medical PoA (MPoA). 

Kumar says, “The person given MPoA is authorised to take healthcare decisions on a person’s behalf, when the latter becomes incapable of taking such decisions himself. This has been recognised by the Supreme Court as well.”

Giving financial PoA to a person allows them to carry out financial tasks on behalf of the testator (the person making the will). It allows the designated person to pay the bills and handle other financial and real estate matters. 

Siddharth Jain, co-founding partner, PSL Advocates & Solicitors, says, “Choose someone trusted—a family member, a friend or even a financial advisor.”

Statement of desire: This is not a technical document. It’s more like a roadmap for the executor of your estate. Jain says, “Through it a person makes clear what he desires and how he wants things to be done.” It usually deals with issues such as how the person’s last rites are to be performed. It can also contain wishes that the person wants his beneficiaries to follow, or could have stipulations regarding how an asset being transferred is to be utilised.   

Should you appoint a co-owner? You can transfer assets via the will or you can appoint a co-owner. The advantage of this is it ensures that a specific asset goes to the person for whom it was meant. However, it also has a disadvantage. Chopra says, “If you need to make a decision regarding that asset, then the co-owner has to agree.” Also, the co-owner becomes liable to taxation for any income that arises from that asset.