Estate and Succession Planning

Contributed by: Kartik Gupta

Delhi Chapter of the IAIP hosted Tariq Aboobaker, Managing Director of AMICORP for an event on Estate and Succession Planning. AMICORP is a multinational company with a presence in 30 countries they provide Trust services to both corporate and private clientele. Estate or Succession planning comes with the inherent question, what will happen after I die. This question makes one think about the future and makes one wonder what he/she want to leave behind and also for whom.

Here’s what one needs to know:

Will – A will is a legal declaration by which a person, names one or more persons to manage his or her estate and provides for the distribution of his property at death.

What is it good for?

1. It is the most basic way to plan an estate, with little upfront costs, it is very easy to create
2. It helps ensure that one’s wishes are carried out, and it can make things simpler and easier for his/her heirs.
3. If one does not have a will, the distribution of the property is left up to the government, and may even end up becoming state property. 

What it is not good for?

1. A will can be challenged against its validity, which could result in overturning the will
2. Since a Will becomes operative upon one’s passing, a Will cannot address the management of his/her assets.

Trust – A trust is a fiduciary relationship in which one party, gives another party, the right to hold title to property/assets for the benefit of a beneficiary or third party.

There are two types of trust,

A living trust – which is there during one’s lifetime and will continue to exist after; and

Testamentary trust – This is created through a will which will be created after one’s passing.

Trusts can be created as discretionary – one relinquishes control of the assets to a trustee or in-discretionary – one still controls what happens to one’s assets. Irrevocable – once the trust is created it cannot be dissolved unless certain conditions are met and revocable – one may close the trust at his/her discretion.

What is it good for?

1. Trusts are flexible and can serve many purposes depending on how one wishes his/her assets should be taken care of and who beneficiaries to receive them.
2. Once all assets are transferred to a trust, they cannot be contested in court (unless ones has create a revocable trust.
3. One will have to ring fenced assets from any liabilities or legal notice on himself/herself (if one is not a beneficiary and the trust is older than 2 years from the liability)
4. Trusts are inherently private, it does not need to be publicly filed unlike a will, only the beneficiaries will know how much the income the trust creates

What is it not good for?

1. Trusts are expensive, costly to establish and the creator must fund the trust. Transfer of stocks, real estate, titles transfers must be transferred to the trust
2. Trusts may or may not be audited, in the case of an unaudited trust chances of fraud and embezzlement exist

There are many good reasons for one to consider establishing a Trust or a Will. One should weigh the various advantages and disadvantages in the context of own personal circumstances and then decide the right choice. Tariq added that he would do all this when he creates his first asset.

– KG