Summary
What challenges arise when an ultra-high net worth family experiences an unexpected death, even with a strong succession plan? This scenario demonstrates how even well-structured succession plans may encounter significant obstacles. This article analyses key considerations for families with complex structures, considerable wealth, and multiple businesses, while suggesting ways to be better equipped for such events.
Introduction
Few events test robust estate planning structures as severely as an unexpected demise. A dispute involving a prominent company recently demonstrated how the sudden demise of the owner/ promoter, compounded by complex family dynamics, can disrupt carefully structured succession planning. Key issues involved control over the family business, governance of the family trust, Will validity, and substantial disagreements over inter-se entitlements to family wealth.
This dispute highlights the need for ultra-high net worth (UHNW) families to have integrated and cohesive succession planning strategies accommodating both familial and corporate complexities while anticipating unforeseen events.
In the illustration above, a Trust beneficially owns a significant stake in the deceased’s listed company, and was reportedly settled by his parents. Since the deceased was presumably the sole beneficiary, his passing raised succession questions within the Trust, including the existence of secondary beneficiaries and consequently, governance of the underlying company.
Subsequently, the existence, authenticity, and intent of the deceased’s unregistered Will was challenged in Indian courts. Notably, the Trust’s assets were not the subject matter of this dispute. Also, allegations of forgery and fraud added a criminal dimension, even seeking to embroil sealed divorce settlements from a prior marriage of the deceased.
This article discusses best practices, common pitfalls, and key takeaways for families embarking on, or currently engaged in their respective succession planning journeys. Existing succession plans may also benefit from periodic review and enhancement.
Estate planning: How much is sufficient?
Despite UHNW families adopting sophisticated succession planning structures, some gaps persist, such as, assets bequeathed in an existing Will are embroiled in litigation; persons nominated to resolve disputes are deceased or estranged; or beneficiaries unaware of the full extent of assets bequeathed. Amendments to taxation or succession laws, such as the potential introduction of estate tax, can render even the most seemingly watertight plans insufficient. What appears obvious during planning may become irrelevant, incomplete, or redundant during enforcement. Accordingly, succession planning should anticipate unknowns, adopting multiple practicable fallback mechanisms.
Family governance and arrangements: A precursor to effective succession planning
Within complex business families or structures, preserving harmony is paramount. Properly executed family arrangements (FAs) can help mitigate disputes and ensure good governance. FAs are voluntary agreements that document a family’s oral understanding, helping prevent disputes in family and business matters. They provide a platform for stakeholders to voice concerns, negotiate, and reach consensus without straining relationships.
Indian courts recognise FAs as instruments for resolving/ mitigating disputes and fostering family harmony[1], upholding them even when mutual compromises go beyond strict legal entitlements or formal registrationrequirements.[2] FAs do not replace Wills or Trusts; rather, they complement them. While Trusts secure business continuity and Wills bequeath personal assets, FAs address behavioural and governance matters that other instruments may not fully capture.
For UHNW families, FAs constitute internal understandings, establishing clear expectations regarding business management, wealth distribution among family branches, treatment of adopted versus biological children, and roles of surviving spouses. Additionally, FAs can provide mechanisms for regular family meetings, establish protocols for major business decisions, and create structured processes for resolving conflicts, preventing litigation. In certain cases, such arrangements can also be highly tax-efficient for reorganisation of family businesses.
Trusts: Should you?
Private Trusts[3] have now emerged as one of the most widely implemented estate planning tools. Broadly, a Trust is a legal arrangement, recorded in a Trust deed, where a settlor (the person who creates the Trust) transfers assets to a Trust, and a Board of trustees is established to manage the Trust property and hold it in a fiduciary capacity for the benefit of designated beneficiaries. Such Trusts may be revocable, i.e., allowing the settlor to make changes during the settlor’s lifetime, or irrevocable, i.e., where the settlor relinquishes any control over the Trust. Trusts offer a degree of flexibility, efficiency, and the ability to ring-fence assets and liabilities within the Trust corpus.
Further, Trusts allow the separation of business, and personal assets and liabilities. In the foregoing illustration, only the promoter’s personal assets became subject to litigation, while the Trust’s assets, i.e., the company’s equity, remained unaffected, thereby preserving shareholder confidence in the company and ensuring its severance from family disputes. Another prominent illustration is the Tata Group, which provides a compelling example of Trusts in action, with a significant portion of its business held by Trusts.
Increasingly, Trusts engage independent professional trustees to manage trust affairs — a departure from the traditional practice of appointing family members and friends to the board of trustees. The neutrality of a professional trustee can prove invaluable in complex family situations where emotions may cloud judgment.
Under the Indian Income Tax Act, 1961, the tax treatment of Trusts depends on the nature of the Trust. A private Trust may be structured as a discretionary Trust, where the beneficiaries’ entitlements have not yet crystallised. Such Trusts are taxed at maximum marginal rates until the Trust income is distributed,[4] whereas non-discretionary private Trusts, where beneficiaries’ interests are predetermined, pass the tax liability in respect of Trust income to the beneficiaries.[5] However, Trusts with cross-border aspects such as a foreign settlor, beneficiaries, or assets require careful structuring and analysis to avoid, among other things, adverse tax consequences. These complexities underscore the importance of professional advice in Trust structuring and overall succession planning. In some cases, a Trust may not be necessary at all, while in others, it may be critical.
“Registered” Will: A must have?
A Will is a legal declaration of a testator’s intent regarding the distribution of their assets upon their demise.[6] Under the Indian Succession Act, 1925, a valid Will must be made by an adult of sound mind,[7] free from fraud, coercion, or undue influence,[8] executed voluntarily with a clear intent to distribute property,[9] signed by the testator or by another person in the testator’s presence and under their direction,[10] and attested by at least 2 (two) witnesses who have witnessed the testator (or such other person) sign the Will.[11]
In ongoing litigation and numerous disputes, challenges to a Will frequently emerge due to errors in the names and spellings of family members. Additional issues may include questions regarding the timeline/ events preceding execution of the Will, lack of a digital trail, and allegations of forgery.
Registration of a Will
Will registration is optional under Indian law. As long as a Will is properly executed, its validity[12] remains unaffected by registration. However, registering a Will establishes a strong, but rebuttable presumption of its authenticity,[13] making it harder to contest registered Wills in courts on grounds of coercion, forgery, or undue influence, thereby significantly reducing the risk of competing claims in high-stakes disputes. Accordingly, this relatively simple and inexpensive step may prevent protracted disputes and ensure clarity.
Typically, registration involves presenting the Will before the concerned sub-registrar, who verifies the testator’s capacity and ensures that the Will is being executed voluntarily, sans duress.[14] The registered Will’s official copy is then preserved by the government confidentially and it is not publicly available per se. Registration makes challenging a Will under Indian law much harder than contesting an unregistered Will, though it does not absolutely preclude a challenge.
Why does one need a Trust when they have a Will?
Trusts are generally established to manage designated assets — such as financial assets, real property, or corporate holdings — to achieve the settlor’s predefined objectives, which may include protecting the interests of a special child, addressing matrimonial considerations, or securing creditor protection. In contrast, Wills generally bequeath personal assets not included in a Trust and may encompass sentimental items, such as personal belongings, insurance policies, art, jewellery, and bank accounts. Further, a Will takes effect only upon the testator’s death (i.e., testator retains control over assets during their lifetime), while the Trust operates for the benefit of beneficiaries, in accordance with the Trust’s objectives.
In complex family situations, clear testamentary instructions regarding personal property are advisable to prevent conflicting claims.
Further, stamp duty is not levied on Wills, while settling real property in a Trust can involve significant costs. Additionally, Wills offer greater flexibility as they can be amended during the testator’s lifetime, whereas amending the objectives of a Trust after the settlor’s demise (or earlier) can be complex.
Thus, succession planning must be tailored to each settlor or testator’s needs and is bespoke. Succession plans should ensure that all components work cohesively and not in isolation, accounting for all assets and future variables. In other words, a Trust should be utilised only after obtaining sound legal advice, confirming its necessity to address specific concerns. In some cases, only one tool is enough, but in others, combining them can better address succession planning objectives.
Blended families and succession complexity
Families can sometimes include multiple households, second marriages, stepchildren, and adopted children, introducing unique challenges, which may result in conflicting claims over family assets and businesses, contentious divorce proceedings, inheritance disputes, between biological and stepchildren. While traditional estate planning placed emphasis on tax planning, modern succession planning prioritises governance, asset protection, business continuity, and legacy preservation, accepting tax as a reality and focusing on tax efficiency rather than avoidance.
Accordingly, relying solely on either Wills or Trusts may not suffice. A well-advised combination of FAs, Trusts (as appropriate), and Wills (particularly registered Wills), complemented by other instruments like duly deliberated and properly executed shareholder agreements, and powers of attorney, may prove invaluable in complex family structures. Comprehensive, need-based legal documentation, coupled with proactive planning and transparent family communication, could avert costly litigation.
Key takeaways: Building a comprehensive plan
Recent family litigation in India shows that efficacious succession planning depends on sophisticated legal structures requiring coordination, clear communication, and explicit instructions to family members, to achieve their intended purposes.
Effective succession planning requires an integrated approach, wherein multiple instruments, each serving specific purposes, function cohesively, to ensure that the failure of one component does not undermine the entire structure.
For global families, professional guidance, periodic reviews, and careful attention to cross-border considerations, especially those concerning taxation, where applicable, are essential. Most importantly, transparent communication among family members, combined with sound legal advice, can elevate succession planning from a mere pre-emptive measure to a strategic advantage that preserves both family harmony and legacy.
For further information, please contact:
Varun Kalsi, Partner, Cyril Amarchand Mangaldas
varun.kalsi@cyrilshroff.com
[1] Tek Bahadur Bhujil v. Debi Singh Bhujil (1966) 3 SCR 440
[2] Kale & Ors v. Deputy Director of Consolidation & Ors (1976) 3 SCC 119
[3] In the Indian context, these would be trusts established under the Indian Trust Act, 1882
[4] Section 164 of the IT Act
[5] Section 161 of the IT Act
[6] Section 2(h) of the ISA
[7] Section 59 of the ISA
[8] Section 61 of the ISA
[9] Section 63(b) of the ISA
[10] Section 63(a) of the ISA
[11] Section 63(c) of the ISA
[12] Section 18(e) of the Registration Act, 1908
[13] Metpalli Lasum Bai (since dead) & Others v. Metpalli Muthaih (dead) by Legal Heirs 2025 INSC 879
[14] Section 41 of the Registration Act, 1908
