What is Succession Planning?
“In this world nothing can be said to be certain, except death and taxes.”
Succession planning in simple terms refers to the passing of assets and investments down from one generation to another. You can decide how much of your estate whether it be property, cars, shares, bonds, Gold, mutual fund units and other financial investments, etc. Its core objective is also to distribute wealth in a predetermined manner to a certain beneficiary or beneficiaries to whomever the owner wishes. It is a dynamic exercise that needs to be reviewed at regular intervals to include any changes that might happen in our life or in the applicable laws of the country.
What is the need for Succession Planning?
- Dying intestate (i.e. without a legal Will in place), can lead to various complications like bickering and serious disputes among family members potentially destroying peace and happiness.You might have read about family battles in the media fighting it out in the courts over the estate of the deceased.In most cases, they turn out to be a painful and traumatic experience of settling a will for the various litigants involved.
- In fact, the situation of families suffering financially due to not getting access to the deceased’s assets is repeated over and over again in thousands of homes every year and the courts take years to resolve the issue.
- If you look around yourself, you are sure to find many real life examples which would make you feel that this situation is like “Kahani Ghar Ghar Ki ” prevailing in several homes but still people in India do not plan for succession.
- The social and family structure in India is increasingly turning nuclear and the number of the affluent rises thanks to the India growth story and aspirations of the next generation vary from the previous one.
- Today, professionals earn more but at the same time the incidence of divorces has increased, which creates an apprehension of the family wealth going to outsiders.
- There is a need to cater to their overall wealth planning for their dependents.
The battle over the late Priyamvada Birla’s Will, in the year 2004, brought to the surface the crucial role played by a Will and the importance of succession planning.
There are several other celebrity cases that have been doing the rounds of the media, where siblings fight each other over the succession of the deceased.
Thus, in our next unit we will discuss the necessity of involving family in financial matters especially in succession planning.