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Estate Planning – Part I

By Girish Venkataraman

“No burden is so heavy for a man to bear as a succession of happy days. ”

With rising prosperity and increasing asset pool possessed by nuclear families spreading across geographies, the need for proper planning of estate is the need of the hour. The goal of estate planning is ensuring that the estate of the individual passes to the estate owner’s intended beneficiaries so as to avoid delays and minimize court proceedings in succession matters.

We have witnessed a few sad and ironical business family splits in India, to preserve their wealth and legacy, family businesses should take initiative and devise an efficient succession plan or estate plan so as to achieve seamless intergenerational legacy distribution, continuity of business, bankruptcy remoteness and safeguarding the benefit of heir’s staying in multiple jurisdictions.

Estate Planning is

– Planning for harmonious succession and disposition of your assets
– Protection of your assets/estate with your family’s needs in mind
– Effective management of your estate during and beyond your lifetime
– Preparing your estate for unforeseen eventualities

Modes of Planning – Will or Family Trust

Efficient estate planning can be achieved either by way of leaving a Will or a setting up a Private Family Trust.

Will: is final declaration of a person’s intentions with respect to his property which the courts endorse only after his death. Thus a Will cannot take care of unforeseen eventualities like any disability or illness as it is towards disposition of property of the deceased rather than management. Most rampant issue that crops up in a Will is contestation on various grounds which may lead to family disputes after the death of the testator. A Probate which is necessary for establishing the rights of the executor or the beneficiaries under the Will in certain cases may take 6 months to 1 year and until such time, the beneficiaries would not be able to use the assets.

In India a traditional way of estate planning has been setting up Hindu Undivided Family (HUF) which is a distinct unit for tax policy as per the provisions of section 2 (31) of the Indian Income Tax Act. However it may be noted that after a property gets apportioned to an HUF, every coparcener has equal right to it and partition of HUF land has often led to clashes and court cases.

Therefore while the HUF with its archaic tax treatment and confused entity fails to cater to the requirements of present day wealthy the Will is posed with un-certainties and the rigmarole of a Probate. In such an atmosphere, one approaches the Family Trusts with a lot of hope and expectations that Family Trusts have managed to standby.

Family Trust: A trust is an arrangement under which the settlor entrusts his property to the trustees, who hold it in a Fiduciary Capacity for the benefit of the beneficiaries. The basic constituents of a trust are Settlor, Trustees and Beneficiaries. The Basic tenets of Trust are transmutation of trust property, declaration of the purpose and the beneficiaries.

Lately Family Trusts have been created and used by a large number of Indian Families as an efficient mechanism of Estate Planning. This has largely been due increasing awareness of the Benefits of Family Trusts and also availability of Professionals who can guide the family with appropriate structuring.


With increasing volatility and uncertainty becoming the new world order, wealth earners’ preference to insulate hard earned wealth from business, legal and personal risks is on an increase through innovative structures. Appropriate forms of holding a business would go a long way in insulating from predatory interests, along with tax efficiency. Creating a legal framework for the family assets, bypassing probate process, safe-guarding interests of family members including maintenance of members with special needs/disabilities, attaching conditions to gifts (be it on attaining a particular age or fulfilment of the Settlor’s wishes) and avoiding family disputes over the property being some of the prime considerations while designing a family trust. Family Trusts provide appropriate structure that protect, preserve and pass on your wealth efficiently.

The writer is CEO, IIFL Investment Adviser & Trustee Services Ltd.

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