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Thought of succession yet?

A succession plan becomes important if you have created assets through your working life. These assets ideally will go to your family in the event of your demise, however, the proportion and timing of distribution if left undefined can cause a great deal of uncertainty for those you leave behind.

There is a lot said about planning your retirement finances but have you also considered a succession plan? What is it and why do you need it? 

Why a succession plan?

The second part first, a succession plan becomes important if you have created assets through your working life. These assets ideally will go to your family in the event of your demise, however, the proportion and timing of distribution if left undefined can cause a great deal of uncertainty for those you leave behind. 

Succession planning may seem like too big a term, but in essence it is just about defining exactly who gets which financial asset after you. As families become more nuclear and the wants and desires of the next generation change, there is a need to ensure that the financial legacy you leave behind is utilised efficiently and without dispute. 

There are essentially two general ways to approach succession planning, make a will or build a trust. 

Making a will

Firstly, no amount is too little when it comes to writing out your will. If you have dependants, maybe your spouse or children or even your siblings, its worth writing it down. The amount of wealth created and the value of the assets is secondary, the primary objective of writing a will is to ensure that the wealth reaches the right beneficiaries. 

Often there is ancestral property that you may have a share of, but after your demise, it may be unclear who the rightful owner of your share is; is it your child or your siblings from the extended family or their children? If its just assets in your name, even then your dependants will have to prove their relationship in the court of law in the absence of a will. 

The presence of a clearly written will ensures that the continuity of your family’s financial well being is maintained. If you don’t want to get into the hassle of getting a lawyer, you can simply write it out yourself and get it legally verified. Creating a will is a simple process, but more than that it is essential to do for a smooth transition of your legacy. 

Often there is ancestral property that you may have a share of, but after your demise, it may be unclear who the rightful owner of your share is; is it your child or your siblings from the extended family or their children? If its just assets in your name, even then your dependants will have to prove their relationship in the court of law in the absence of a will. 

Building a trust

This is a more complex task and hence, required when the wealth creation and distribution is more complicated than simply giving to your children and spouse. Typically, family businesses have a shared pool of assets which is meant for the benefit of more than one branch of the family tree. In such cases, it's when the matriarch/patriarch passes away that the need for a clearly defined succession plan arises. 

However, life is becoming more dynamic today. There are a greater number of divorces, despite the separation the family and children need to be provided for. Moreover, for earlier generations, joining the family business was a given and that too is changing. If one wants to branch out into a different line of business, do they get to withdraw money from the family asset pool? Who decides that?

Unlike a will, a trust and its provisions can come into effect immediately after it is created. There are many nuances involved in creating trusts and its best to involve an expert in the process.  There are different types of trusts and also tax provisions which you will have to consider. 

Either a Trust or a will, having some kind of a succession plan is an essential part of your financial journey. There is little merit in spending so much time taking care of your investments, if you don’t define how it benefits your kin when they need it the most. 


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