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Why succession & estate planning becomes important in the age of a pandemic

Rajmohan Krishnan in The Times of India

With over 55 million cases across the world, the novel coronavirus pandemic continues to wreak havoc globally. Apart from causing social and political instability, the pandemic has also upended the economic sector and markets across the world are still reeling from the impact of the first wave of cases. Amidst such economic uncertainty and turmoil caused by this global pandemic, there is a pronounced need for HNI and UHNI families to secure their wealth and ensure that there is a certain level of financial preparedness.

Financial security and growth of wealth depends in large part on continuity and stability within a family structure. Armed with its rapid transmission rate, Covid-19 is a constant threat to the lives of key family members and should thus be treated as an imminent risk to stability and financial security. There are several ways in which HNI and UHNI families can secure their hard-earned wealth and shield it from the vagaries of this pandemic; creating a well-defined estate plan can be a starting point.  At its core, estate planning is the act of preparing for the transfer of a person’s wealth and assets during as well as after his or her death. It includes among various applicable mechanisms, careful drafting of wills or setting up of trusts such as business trusts, private family trusts etc., in order to secure one’s wealth and avoid legal squabbles over property and money during and after the death of a family/ business head. Wills are traditionally more sought after as tools of succession and estate planning as they are simple and legally-binding documents that come into play only in the event of demise. However, the chances of a will being contested in court are high and it can drag families into long-drawn legal battles that can be detrimental to familial wealth prospects. Hence, an increasing number of families are looking at Trusts as a mechanism to secure their wealth. A Trust typically involves a tripartite fiduciary relationship and a trust deed gains crucial importance as a legally binding arrangement along with constitution, shareholders agreements, Letter of Wishes that lay down the framework for management, control, and governance of the family business and wealth. Estate and succession planning especially in the modes of Trusts and wills have acquired heightened importance during this pandemic as they secure financial assets and ensure that wealth is passed into the hands of rightful heirs.

In addition to creating trusts and wills, there is also the need to have family governance structures in place to educate and facilitate communication between family members. All too often, multi-generation families have a clash of ideologies and opinions due the younger generation’s vastly different approach to wealth management and business. A family governance structure can help sort out these generational differences and help HNI and UHNI families maintain harmony.

All processes of estate planning involve detailed legal and financial guidance and their creation is a tedious process. For HNI and UHNI families, a well-experienced family office is usually the best fit for estate and succession planning and wealth management guidance. A multifamily office (MFO) armed with years of experience and multiple faculties of counsel—ranging from legal experts, investment advisers and account & tax advisors are in a unique position to help HNI and UHNI families with diverse structures.  A typical MFO will have complete suite of services across investment advisory & execution, succession and estate planning, lifestyle and tax service needs of high net worth families. Whether it is the creation and registration of wills or managing and administering assets under a private family trust, a family office can help make sound estate planning decisions that can withstand the onslaught of emergencies like a global pandemic.

The economic shifts caused by the novel coronavirus are still unraveling and the full extent of the damage it has caused to the world economy is still unclear. The pandemic, in no opaque terms, has highlighted the need to plan ahead. Hence, it is imperative to look at succession and estate planning as a critical requirement rather than an elective option only to be activated in times of a crisis.