Succession planning is crucial not just for business; it is equally important for personal assets. Due to the growing trend of family disputes, there is an increasing awareness to take active steps towards succession planning of personal assets.

Personal assets may consist of your house, shares of business entities started by self, listed shares or securities, ornaments, and so on.

Now, there is no single approach for succession of these assets as much depends on your personal situation.

To start with, you may consider writing a will. Or, you may gift the assets during their lifetime. Three, you can vest these assets into a family trust or create a family trust under the will. Any of the approaches can be implemented singly or in conjunction with the others. For example, you can transfer a certain set of assets to the family trust and the remaining under the will.

Succession planning is complex and requires close attention.

Keep in mind First, it is important to have a roof over your head and an assured monthly income. After your demise, your spouse should have life interest in such property and assured monthly income so that dependence on anyone is minimal. Two, if assets are transferred to a family trust, you can explore the possibility of providing to the trustee a wish-list of how the assets should be distributed. However, this letter of wishes may not be legally binding unless it forms part of the original trust deed or is recognised in the deed as a document that binds the trustees.

Three, while drafting the trust deed, it is important to identify the beneficiaries, share of each beneficiary and the points in time when the distribution would be effected. Deferment of distribution becomes important when minor children are involved.

Strengthens family relationship Four, in case of assets like shares of business entities where you would like to transfer the shares to the next generation, it is important to prepare a family constitution.

A family constitution addresses issues such as involvement of family members in business, employment of non-family members, board membership, share of ownership and voting rights, family meetings, and so on. While it can be complex, it strengthens the family relationship and the operating environment for the business.

Clear communication of the plan to avoid future conflicts is important. So is documentation; a succession planning document should be a legal and well-drafted one to avoid any mis-interpretation.

The writer is Senior Manager, Deloitte Haskins & Sells

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