Estate planning ensures that the wealth and legacy you have built is passed smoothly to the next generation. It would be a shame for either to suffer or lose value on account of conflicts due to ambiguities in succession.
It is natural to put off planning for management of your assets in the event of incapacitation or death. After all, such events seem unlikely and distant. But uncertainty is a way of life, and being prepared has never proved to be unfavorable.
An estate is the aggregate of all your investments and assets – movable as well as immovable. It includes partnership shares in businesses, stocks, debentures, mutual funds, life insurance, bank deposits, intellectual property, and personal assets like paintings and antiques. Liabilities, though not technically part of your asset base, must be properly dealt with in your estate too.
An estate plan takes care of your estate’s management, preservation and legacy, during and after your lifetime, by ensuring the following:
- Planned business succession
- Contingency plans in case of business losses
- Cash flow management to meet family needs
- Amicable distribution of wealth
- Avoidance of family disputes
- Administration, protection and preservation of assets for beneficiaries
- Management of all types of assets through expert advisors
- Minimization of inheritance/estate taxes
- Provision for charitable purposes
Common estate planning tools include wills, trusts, foundations and insurance. Each of them provide varying degrees of asset protection, tax efficiency and protection from creditors. Trusts are the usually favored route to achieving these objectives.
Effective solutions to estate planning involve the intersection of tax, law, and finance, with both domestic and cross-border considerations. Income, assets, and family members spread across multiple jurisdictions add to the complication.
Determine your family’s core capital and excess capital. The core capital helps to maintain your lifestyle and provide adequate reserves for unexpected commitments. Excess capital, i.e. the assets over and above your core capital, can be safely transferred to the second generation or beyond, without jeopardizing the first generation’s needs. This is known as generation skipping, for which some countries provide tax exemptions.
Major legal considerations pertain to drafting and ensuring the validity of documents. Tax implications also need to be minimized, in both the home country and others. Add to that the constant amendments to law and taxes. The impact of these changes must be understood and managed.
Non-legal or non-tax concerns include business succession, philanthropic activities, privacy and asset tracking, identification and preservation.
Estate planning can be formidable and complex, but lawyers and tax consultants can help you devise a plan customized to your needs. They will help you articulate your wishes clearly, prevent errors, minimize taxes and adjust your plans with changing circumstances.
An integrated accounting and investment system makes all the assets and liabilities that go into the creation of your comprehensive estate plan readily available. It saves you the effort of collating disparate data for making your plan and discussing with your family members and legal advisors. A consolidated view of your personal and financial assets and liabilities, whether they form part of a trust or are earmarked for charity, gives you control over your wealth. You can plan not just from a short term financial perspective, but create lasting security for several generations. Thorough and informed planning, backed by the solid foundation of your family office, maximizes what you leave behind for your loved ones.
Key Takeaways:
- An overarching estate plan, considering both legal and non-legal aspects, ensures a smooth transfer of wealth and legacy
- Estate planning helps to minimize tax liabilities on inheritance
- A consolidated view of all personal and financial assets and liabilities is essential to maximize the legacy left behind for future generations.
