The curious case of planning for successors
India as a nation is proud of its film artistes, sports personalities, authors and musicians. There is definitely a lot of talent in the country. With success and fame come wealth and money, but whether these specialists are able to manage their wealth efficiently and generate further wealth and assets is the question. Media reports have time and again established that not all celebrities are equipped to manage their wealth efficiently, especially when earnings are sporadic in nature. In cases where they are able to manage their wealth, they may ignore the very important part of succession planning.
The earning duration of such individuals is generally short-lived and so there is a greater need to manage it. Some heart-wrenching stories include those of Olympic medallists and champions and once-upon-a-time Bollywood stars who died in penury. As the society and market in India evolve, the nature of wealth for celebrities has changed and is no longer restricted to traditional assets like fixed deposits, tax-free bonds, jewellery and real estate. The new definition of wealth for these high net-worth individuals (HNIs) now extends to intellectual assets, especially in the heavily contested area of copyrights, trademarks and brand image. It is important to not just manage these today, but also for the future.
Succession planning is one area where HNIs from the fields of sports, cinema and arts, as well as traditional business families, are struggling. They need to build and expand upon traditional succession planning options like personal wills. Trusts are slowly and steadily emerging globally and in India and are considered a well-accepted mode of succession planning, which can bridge the gap between the traditional and intellectual asset classes of wealth.
Let’s take the example of artistes, performers and authors whose wealth today is locked in their respective literary and musical works, from which they are entitled to receive royalties. The Indian Copyright Act, recently amended, now recognizes these rights and enables planning, which celebrities can undertake, to ensure succession of their wealth in a timely and efficient manner. One option is to structure it in a way that royalties collected by copyright societies are received in a private trust managed by an independent institutional trustee, whose beneficiaries are the celebrity and their descendants.
As life moves from one phase to another, so does wealth. With the two being intertwined, it is important to acknowledge this and initiate an effective succession plan at the earliest.
Satya Narayan Bansal is the CEO, wealth and investment management, India, Barclays.