India’s uber-rich go well beyond the will

Preserving family wealth and ensuring business continuity across generations is intricate and involves legal, financial, and strategic considerations. Recent survey insights reveal a growing appreciation among affluent Indian families for the importance of this essential endeavour.

Succession planning: An imperative

Succession planning is not merely about deciding who inherits what; it is a multi-layered process involving several complex aspects, such as asset protection, conflict resolution and the preservation of family heritage.

According to The Wealth Index by 360 ONE Wealth, in association with CRISIL, 72% of respondents acknowledged the importance of a formal succession plan. This sentiment is even stronger among ultra-high-net-worth individuals (UHNIs), with 78% considering it critical. 

Further, 74% of UHNIs have already initiated family discussions on succession planning, compared to 64% of high-net-worth individuals (HNIs).

The figures indicate that awareness of the need for succession planning is high, particularly among India’s wealthiest. Despite this, a gap still exists between awareness and execution. 

Also read: Avoiding the patriarch trap: Lessons in succession planning for Adani and Ambani

While 86% of UHNIs have either started or completed their estate planning—formally or informally—there remains significant room for improvement in translating intent into action.

Popular approaches at hand

The wealthy in India prefer three primary models of succession planning: wills, family trusts, and foundations. 

The Wealth Index findings reveal that wills are the most popular method, with over half of the respondents opting for this route. A will is a legal document specifying the distribution of wealth posthumously, and it remains the most straightforward and widely recognized tool for estate planning.

However, a notable divergence emerges when looking at alternatives beyond wills. UHNIs tend to favour family trusts as a means of preserving legacy among generations and foundations for undertaking charity.

Safeguarding family enterprise

For many wealthy families in India, succession planning also involves ensuring the continuity of the family business. 

Family-owned businesses form the backbone of many UHNI and HNI portfolios, and the desire to pass these enterprises on to the next generation is strong. 

The Wealth Index highlights that 50% of respondents expect their children to join the family business, with a slightly higher inclination among HNIs (55%) compared to UHNIs (46%). 

Interestingly, one-fourth of UHNIs anticipate that their children will not join the family business, compared to 16% among HNIs. This has prompted many to develop contingency plans, including formal business succession strategies, including maximizing the business's profitability in preparation for a sale (22%), exploring mergers (19%), or appointing external management (13%). 

Also read: Wills and trusts: How blended families can navigate succession planning

UHNIs are more likely to implement these backup plans, with 32% adopting a formal business succession plan, compared to just 13% of HNIs.

Considering complexities

Effective succession planning is far more than drafting a list of beneficiaries.

It requires a holistic view of the entire estate, which may include real estate, art, collectibles, cars, and other valuable assets in addition to financial investments. Further, the wealthy often have assets spread across multiple geographies, adding another layer of complexity.

It is crucial to consider liabilities, ongoing legal issues, and the potential tax impact of wealth transfer, all of which must be meticulously addressed to avoid complications. 

For business owners, succession planning also involves deciding who will take over the company and in what capacity, a decision fraught with challenges, especially when family dynamics and differing visions for the future of the business come into play.

Estate planners bridge the gap

While the Wealth Index suggests that the wealthy understand the necessity of professional advice—69% agreed that external support is critical—there remains a disconnect between awareness and action. 

Many wealthy individuals are yet to formalize their estate plans despite acknowledging the complexities involved. This gap between intent and execution underscores the importance of consulting with experienced estate planners. 

An estate planner can provide invaluable guidance, helping families navigate the multifaceted succession planning issues. From facilitating sensitive family discussions to addressing legal, financial, and tax implications, a professional can ensure the process is comprehensive and seamless. 

Also read: How taxes and fees add 7-12% to your property purchase cost

Estate planners also play a key role in educating clients about the advantages of alternative succession vehicles, such as trusts and foundations, and in implementing strategies that align with the family’s long-term goals.

Succession planning among India’s wealthy is a sophisticated, multi-layered endeavour that requires careful consideration of various factors. In a landscape where the stakes are high, the guidance of a trusted advisor can make all the difference, safeguarding wealth across generations and setting the stage for a prosperous future.

Girish Venkataraman is executive director and head-estate planning, 360 ONE.