NEW DELHI: Recent reports that the country’s richest family are creating an estate plan through private trusts have once again raised concerns about the dreaded death tax return. But in recent times, regardless of inheritance tax, even those with far fewer zeros in their name have focused on planning for inheritance, often using trusts as a vehicle to transfer wealth to their descendants.
A new generation of wealth creators are communicating more openly and concretely about money and mortality – topics that have traditionally caused indigestion on the dining table. They are ready to relinquish control in favor of intelligent estate management. The emphasis is on the sustainability of the family business. Not just business owners, even wealthy professionals see trusts as a smart way to organize the distribution of wealth, especially after the pandemic.
“Over the past five years, we’ve seen an explosion in trust and succession planning,” says Vishal Gada, whose boutique firm specializes in estate and estate planning. “Families suddenly realize that there is a better way to manage and bequeath their wealth. Not just those in business families, but we’ve seen professionals say that if anything were to happen to me or my spouse, we would like a guardianship trust that will hold the wealth until our children reach maturity. And maturity doesn’t necessarily mean legal adulthood, but you could keep a higher threshold, say 30 or 35, after which the children can be added as trustees in a family trust, Gada adds.
Generally speaking, a private trust – as opposed to a charitable trust – is a non-legal entity but with its own PAN number, bank and demat accounts, into which you can transfer assets. Once the assets are transferred to the trust, the “donor” loses control. The appointed trustees then manage the assets according to what has been set out in the trust deed, and the beneficiaries benefit accordingly.
So why more people view the private trust as an estate vehicle other than the fear of impending estate tax? Tax planners and wealth managers say there has been a surge in wealth creation over the past decade, leading to smarter wealth planning. Many draw inspiration from wealthy families in the west, like the Waltons who ran Walmart through private trusts and separately created charitable trusts.
Today, family structures are becoming more complex. With divorce becoming common, the fiduciary circle protects the beneficiary’s assets against alimony claims.
“There are many cases involving disputes over child support settlements. Lawyers are of the opinion that if the trust deed does not give the beneficiaries the right to withdraw the assets, then even a court may be unable to order the trustees to discharge the responsibility for child support. ‘a particular beneficiary,’ Gada said.
Gradually, the inheritance bias in favor of male heirs is changing as well, and families can use the trust as a way to ensure that a girl and her descendants will receive payments in perpetuity, without her husband or step-in-law. family have any control over the asset.
Finally, it allows parents to pass on their patrimony in a phased manner during their lifetime. A Mumbai businessman and father of two grown children sums it up. “I created a trust because I want to pass my wealth on to my children at different times in their lives – at the time of marriage, at the time of a possible divorce. Confidence allows that. A will can only be executed after death and it can always be contested. In addition, the trust protects my assets from any potential liabilities that I may have along the way. ”
The succession skirmishes and legacy storylines have been legendary. Families often tiptoe around these issues and live in constant insecurity. “In addition to being a lawyer, I am often called upon to solve more delicate problems,” explains Abhijit Joshi, whose law firm specializes in succession planning.
“Love and insecurity tend to coexist. Often times my job is to bridge the communication gap between two generations and alleviate insecurities between family members … then the implementation becomes much smoother.
But lawyers advise that a trust only makes sense after crossing a particular threshold of wealth. Otherwise, the additional administrative burden of keeping records, and transfer or stamp duties in the case of real estate, are not worth it. “We do not actively advise our clients to create such trusts,” said senior counsel Rustom Mulla.


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