Is Your Succession and Estate Plan Ready?
Throughout his career as a Professor in a reputed educational institute, Satish invested in land and upon his retirement, he had amassed quite a large property. Given that he and his wife had his handsome pension sum to fall back on, the couple were keen on leaving their real estate to their two children, a son and a daughter and for the same; they approached their CA for advice. It was at this juncture that they came to know about the aspect of succession and estate planning, an avenue which would enable them to optimally chart out the nitty gritties of their children’s inheritance. If you are also considering transferring your assets to your successors, here is everything you need to know about the often overlooked landscape of succession and estate planning.
What is estate and succession planning?
The practice of succession planning involves the transfer of duties or property ownership from one individual to another, and the same is typically undertaken to safeguard the interests of the owner. It is often mistaken for estate planning, although both aim to secure and allocate assets to rightful beneficiaries, albeit with differing scopes. Specifically, succession planning entails determining or designating the individual who will take over a business upon the retirement of the owner or founder while estate planning revolves around managing and dispersing one’s assets following death. Based on your personal requirements, you can opt for either or both of the options to ensure a seamless transfer of your assets to your successors.
Why is succession and estate planning important?
Now, you may wonder about the importance of succession and estate planning – after all, your successors are likely to be privy to your desires about how your assets should be managed or distributed, in the event of your retirement or demise. This inherent knowledge and understanding among your successors may, in your opinion, be as binding as a succession and estate plan but data suggests otherwise. According to a report, 70% of generational wealth gets lost by the next generation, with 90% being lost by the time it reaches the generation after that, indicating the transient nature of wealth which is not enabled by necessary paperwork. Further, a survey indicated that over 80% of investors were worried about the smooth transfer of assets, whereas only about 40% had undertaken discussions with their successors, about their wishes for their assets.
In this scenario, optimal succession and estate planning can facilitate wealth preservation, ensuring the continuity of prosperity for both present and future generations, in addition to prompting the smooth transition of assets and responsibilities within families or businesses – thereby averting conflicts and enabling the precise execution of intentions. Further, estate planning extends beyond finances, encompassing guardianship decisions for minors or special needs dependents and fostering security amid uncertainty. By crafting comprehensive estate plans, you can also pre-empt legal challenges and reduce the risk of prolonged court battles even as utilising trusts and other tools can effectively shield your assets from potential legal threats.
Do you need estate and succession planning?
Every individual who plans to set aside an inheritance for their successors requires either estate or succession planning but how should you choose between the two? Usually, when an individual possesses several assets or businesses, it is advisable to integrate both estate and succession planning to ensure a smooth transition both during their lifetime and after their passing. Alternatively, if your goal is to plan for your heirs, then succession planning becomes essential to ensure that your assets are distributed among your descendants, according to your wishes, after your death.
What tools can you leverage?
There are four popular tools which can come in handy while undertaking estate and succession planning – while a last will and testament allows you to dictate asset distribution after death, superseding intestate laws, a private family trust, established during your lifetime, can manage assets during and after life, aiding succession planning and protecting assets. Separately, a gift deed transfers your assets, during your lifetime, to the chosen beneficiaries even as a Power of Attorney authorises a trusted individual to manage your finances in the case of your incapacitation.
With these imperative aspects in mind, you can move ahead with your succession and estate plan in a seamless manner and ensure optimal wealth transfer to your inheritors.