Emergence of Estate and Estate Planning in India

We have seen estate planning gain in importance over the past two decades. What do you think is the reason?

India has experienced significant wealth creation over the past 20 to 25 years. With the increase in the number of wealthy families, the need for heritage preservation and estate planning has grown in importance.

There is a saying “from shirt to shirt in three generations”. Data suggests that around 70% of wealth is lost when it is transferred from the wealth-creating generation to the next and around 90% is lost by the time it reaches the third generation. Therefore, planning is important.

It’s interesting! Tell us about popular tools for estate planning?

Wills and private trusts are the two tools used around the world for estate planning. A will, as we all know, is an age-old concept and the most common tool used to bequeath property to potential legatees. Trust, on the other hand, is a more advanced and structured tool generally preferred by wealthy families.

However, wills and trusts do not substitute for one another, but rather are complementary in nature. A combination of the two works best for most families.

Why do wealthy families prefer private trusts?

Unlike a will that does not come into effect until the death of an individual, a trust could be created during a person’s lifetime. Assets that are part of a trust are not subject to probate and are therefore not subject to challenge in relation to a will.

In addition to ensuring a smooth intergenerational wealth transfer, a trust also helps to lock in assets. Additionally, it could help minimize the impact of inheritance tax and inheritance tax for families whose members reside in countries like the US and UK.

What does asset ring fencing mean?

When structured appropriately with respect to the right do’s and don’ts, a private trust could help isolate (i.e., do’s and don’ts).

You mentioned inheritance tax and inheritance tax, can you expand on that?

This is a tax levied on the estate of a deceased person. This tax must usually be paid before the assets are passed on to the next generation. India also had inheritance tax since 1953 before being abolished in 1985. Many countries like the United States and the United Kingdom levy this tax and the rate reaches 40%.

The United States recognizes a concept called “Foreign Grantor Trust” which is very popular among families whose members reside in the United States.

What are the other advantages of creating a private trust?

For promoter families, this helps separate management and control from economic interest. In addition, it is advantageous for families planning – beneficiaries residing abroad, minor children, a special child, disability and old age.

Has the Covid changed the outlook for succession planning?

Well, the need for succession planning has always been there. Families have created trusts and individuals have been writing wills for decades now. It is true that in times of uncertainty like the Covid, people have started to place more importance on the subject. Since we are all mortals, it’s important to find the time to put together a good succession plan.

Tell us about Warmond. When was it created and what areas of succession planning do you cover?

Warmond was established in 2006 and is one of the oldest and largest independent trust and trust service companies in India. In 2016, we acquired the fiduciary business of Julius Baer – formerly DSP Merrill Lynch Trust Services Limited. The acquisition established Warmond as an industry leader in the trusteeship business space in India.

We cover the topic comprehensively, i.e. setting up private trusts, acting as corporate trustee, drafting wills, obtaining probate and acting as executor. .

Tell us about you. How has your journey been so far and what is your mantra for success?

I am a lawyer by training and have nearly twenty years of experience in advising wealthy families. My colleague Ms Anuradha Shah and I took charge of Warmond about 6 years ago. I must say that this trip has been very interesting and rewarding. Acquiring the Julius Baer Trust Company, building a wonderful team of lawyers and accountants, gaining the trust and approval of our clients and creating the ” Warmond ‘brand have all been extremely satisfactory.

As a business owner, I believe that the key to success lies in the satisfaction and happiness of “employees and customers”. You keep them happy and they help you achieve excellence and greater success in your journey.

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