Why do we dodge a decision on estate planning?

Facing one’s mortality is never easy. While it may be difficult to discuss such a subject, especially among your loved ones, not discussing it at all does not prevent the event from taking place. Just as you strategize to accumulate and manage wealth, it is prudent to create an extended plan to ensure a seamless transfer of assets to your loved ones.

Drawing up an estate plan means deciding who gets which asset from your estate. You need to evaluate the future realistically by evaluating these likely scenarios: what is the likelihood of your spouse remarrying? What if your child died unexpectedly? What if there is a divorce in the family? Do you wish to leave considerable assets to a family member who is a spendthrift or prone to wrong habits? Such and many more questions that beg emotional decisions need to be taken but this should not be stop you from making a decision at all as it will result in you losing control of who receives what altogether.

Even investment-savvy people erroneously believe that estate planning is reserved for the super-rich or families with complex relationships and cross-border assets. In reality, an estate plan is essential for anyone with assets who wishes to pass them on to loved ones.

As much as we may want to believe we are rational individuals, we often tend to base our decisions on our biases that may not necessarily result in rational decisions. For instance, many individuals are of the belief that as their forefathers never made an estate plan, it is not a necessity, failing to acknowledge the changes in regulatory framework, complexity of assets and value system among generations. Another popular bias is that discussing matters related to distribution of wealth among family members will lead to family disputes. A conflict arises when there is a difference of opinion, and we need to understand at times that it is fine to agree to disagree. Many times, divergent opinions may also lead to a healthy discussion taking the face of a constructive conflict that may in fact do good to the family as every family member is allowed to voice their thoughts and views. This may in fact hold the potential to mitigate destructive conflicts in the future.

Society’s perceived gender roles often lead to the misconception that wealth planning and succession are solely a man’s responsibility. Women should recognize the need for an estate plan, especially if they hold assets in their name. Even if women hold fewer assets compared to their male counterpart, an estate plan is a necessity. Such plans are crucial, also considering the potential for substantial inheritances in the future.

Many individuals underestimate the need for an estate plan due to a lack of awareness. Some believe that nominating beneficiaries is sufficient, ignoring the importance of a comprehensive will. Without a will, intestate succession laws dictate asset distribution, emphasizing the importance of a tailored estate plan so that your wealth gets inherited as per your wishes to your desired inheritors. By overcoming these inhibitions and preconceived notions, you can safeguard the interests of your loved ones. An estate plan not only ensures the smooth transfer of wealth but also shields your family from unnecessary financial and emotional hardships.

Sneha Makhija is head of wealth planning, Sanctum Wealth.