Why Succession Planning Fails & How to Get It Right

Discover why many succession plans fail and learn the key strategies to protect your family's wealth, avoid disputes, and ensure a smooth transfer of assets.

India, with its long-standing line of rich history and heritage, is not new to the tales of battle for inheritances.

From stories of feuds and struggles between two groups of cousins to win their ancestral legacies as recited in the 9th BCE Mahabharata to the father-son duo fight in the Raymond case, this explains how only a few get it right in succession planning.

A Peek into History.

India witnessed one of the worst economic crisis in 1991.

To mitigate the aftermath of the war, the Indian government had embarked on a new journey to raise the economy from scratch.

The resulting rapid increase in growth opportunities has resulted in a better economy and standard of living for the people.

Later, with the advent of industrialization, the investment mentality of people changed, escalating the nature and status of the economy.

As the process continued, the batons were passed to the next generation, who took the pace of their predecessors and ancestors, leading to individual and national-level change.

But as the creation of wealth became the sole concentration, the future and security of the assets became a huge question mark.

Current Scenario.

As per the Indian Wealth Report, 55% of the individual wealth of Indians is in financial assets, while physical assets account only for 45%.

As people get more concentrated on accumulating wealth, few think about the nature of the fate these hard-earned assets face in their absence.

According to a 2013 Financial Times analysis, Asian families experience a greater deal of difficulty when it comes to discussing succession.

Though the investments are made for the betterment and security of their family and younger generation, the patriarchs are reluctant to provide clarity on succession and asset details to the younger generation for several reasons, most importantly the loss of control the patriarch holds and the you-are-not-ready-to-know attitude.

Such reluctance shown by the patriarchs is more likely to create a possibility for an Indian family to fall into troubled waters in the event of the patriarch’s death by entering into a disagreement of authority and assets ending up in the wrong hands, resulting in intergenerational friction, family forays, long running legal disputes, and draining valuable resources that could have been put to better use.

Succession Planning.

Succession planning is not just meant for the elite but for every person who wants to safeguard their hard-earned assets, irrespective of the amount of wealth they make.

It is also to make sure that the assets are transferred properly to their legal heirs of their choice.

Based on the existence of the Will, succession of a person can be classified into two: Testamentary succession and Intestate succession.

A testamentary succession is when a person’s properties pass to the legal heirs of his choice as named in the Will left by the deceased.

If the deceased has left a legally valid Will, it ensures that the assets reach the right hands, as the person who receives the assets, i.e.

the “Beneficiary” of the Will, is determined by the Testator.

In the event wherein the deceased has not left any Will or any other form of testamentary disposition such as a Gift or a Trust, the asset distribution takes place in accordance with the succession laws of the land, this type of succession is called Intestate Succession, and he or she is called as an “Intestate”.

In India, the laws governing the intestate succession are complex and depend on the religion of the intestate.