Suppose you are sitting with a 72 year old man with about Rs. X crores of family net worth – largely self made (well time made too!!) and are discussing who to do a successful family wealth transfer…what would you look at?

Having a conversation and developing an inheritance plan can be a high tension job. Even a little emotional,  but it will benefit your family at a later date. This is the time to discuss and understand the goals, values, and ambitions of each person and to decide how to distribute your inherited money and your earned money among them. Make sure that your Estate Planning documents (and your assets and liabilities) accurately reflect your views as on that date.

Each family member should understand how much is there in the kitty, how much belongs to him, how much for the ‘family good’ , how much for vacations, how much for family events, asset purchases,…better to have a heart to heart discussion on the same They need to appreciate each other’s goals, values and be prepared to discuss ways to establish a common ground. Those who are managing the money at present may have plans for the future that will influence the future actions. The purpose of the meetings and discussions is to get these ideas to the persons in control so that the family reduce the potential stress that may occur. Obviously this has to be done while you are around! In addition to discussing goals and objectives, it is necessary to address the logistics and the reality of establishing the documents, manage the asset allocation, clearly link the investments to the goals, and will drive your estate planning and to think about the possible scenarios that could occur. There are certain difficult questions that should be asked – who will take care of the older people should they need it? Who will have control of the assets – currently it was one man who was accepted as the boss, because it was his money. What are negotiable expenses and what are clearly non negotiable?

Will the eldest son decide how much money the younger son’s school fees should be? Or should this wealth be used only for something substantial like business investments or education abroad?

Will the family wealth be touched for paying a ransom? what if a family member lost Rs. 30 lakhs in gambling debt? will it be paid?

Who is to decide what is a reasonable expense and what is not?

These tough and very difficult and even embarrassing questions will need to be answered and the discussion should occur sooner rather than later.

Well how much fees will you pay Subra for asking these embarrassing questions? Well, the client is still to ask this question.

 

 

 

 

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  1. Subra sir, I think that beyond a certain net worth, it makes sense to create family trust with professional trusties (like banks) with clear instructions on how to manage family wealth. Your views please.

  2. Subra sir, Actually I believe that one should make sure the wealth does not increase beyond a certain point esp. money that would be left as inheritance. Nothing wrong in leaving them a house and some interest income but not much more than that. Your children should learn the importance of hard work and knowing that a large inheritance will be coming their way surely reduces the need and the incentive. I am a 33 year old with significant inheritance coming my way. This is true even during your working life.

    my twopence.

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