Rush for wills to secure family wealth in Covid

© Provided by The Times of India

Namrata Singh & Reeba Zachariah | TNN

Mumbai: A businessman in his late 40s, who had severe Covid and was desperate for oxygen and a hospital bed, had given up hope of surviving the brutal second wave that has ravaged several families. “When I survived, I felt that miracles do happen. But this has shaken me up,” he later told friends and associates.

While recuperating, he realised the catastrophic financial impact the pandemic would have had on his family had he not made it in the absence of a will and the separation of personal assets from his well-spread business. While his son is still studying, his wife and daughter know next to nothing about his finances. He is now working on his will and plans to ensure his business and personal assets are segregated and securely kept in a trust for the benefit of his family.

There has been a spike in registration of wills, succession planning at family businesses, and estate planning over the last year. Moreover, the pandemic has made such legal processes age-agnostic. While in the past mostly parents or grandparents may have made a will, many such families now want their children (often in their late 20s and 30s) to make one too. Legal and estate management firms said they are working with young individuals and families with small children to make succession plans, even if temporary. Some are even appointing a temporary guardian.

HDFC Securities head (products & business development) Rajeev Srivastava said the firm witnessed a growth of 76% for e-will registrations in 2020-21 as compared to the previous fiscal. “Many customers in the age group of 40+ are creating their e-wills. A lot of corporate employees, too, have shown interest in creating their wills,” said Srivastava.

Cyril Amarchand Mangaldas (CAM) partner and co-head (private client practice) Rishabh Shroff said, “We have seen many individuals/promoters wanting to make urgent wills, almost overnight — they want to make a ‘stopgap’ or ‘temporary’ will to ensure their assets pass smoothly to the next generation and the family in case something happens to them suddenly. They will revise the wills later to make it more detailed and robust once things settle down, but they need a temporary will like this for emergency situations.” In one such case, from the time a client called CAM to when he had a signed will in place was less than 1 hour. “And this client is one of India’s wealthiest family businesses.”

Law firm Majmudar & Partners has seen a rise in inquiries for estate planning. The firm’s partner Neerav Merchant said due to Covid and general uncertainty about one’s life, people are keen to expedite estate planning.

The Supreme Court recently ruled that if a businessman gives a personal guarantee for loans taken for business, despite a limited liability partnership or company, the invocation of that guarantee extends to his/her assets. “Some are aware enough to create a will, appoint nominees to their bank accounts and investments, and have investments in joint names. But what is extremely important for businessmen is to segregate personal assets from the business,” said Daksha Baxi, a tax expert at SRI Solutions.

“A businessman can lose his personal assets when the business faces a crisis of the nature seen in this pandemic. It is therefore imperative for businessmen to consider an asset protection trust for their personal wealth. Trusts can serve several purposes, including smooth passing of wealth to the next generation, ability to get professional advice on wealth management, cater to special needs of family members, and save on estate duty if it is brought in,” said Baxi.

Shroff of CAM said, “Given the recent judgment allowing personal guarantees to be enforced, we are seeing a spike in queries from clients who want to know if trusts can be used to insulate their personal wealth from their company’s risk. It is still early days, but this will be a driver in planning for promoters in future.”

Gautami Gavankar, CEO – estate planning & trusteeship, and head – family office at Kotak Mahindra Group, said succession planning was not taken up earlier as a priority in most cases. “The typical response used to be, ‘Why do I need a will at 30?’ The pandemic has made people realise the importance of succession planning, creating a will/trust, and having a safety pot to meet the post-pandemic needs of a business, which is dramatically different. Across age groups, people now want to ensure that they are prepared. Families, in the midst of this pandemic situation are taking some quick and effective decisions, including emergency plans for businesses and families and laying down a clear leadership transition. We are also seeing increasing instances of the next generation being trained and coached in the financial affairs of family businesses,” said Gavankar.

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