5 Things to know about estate planning

Think of your family’s financial future like a well-organised Indian joint family – everyone knows their role, responsibilities are clear, and wealth transfers smoothly from one generation to the next. Estate planning works the same way, but many successful investors treat it like that drawer full of important papers they’ll “sort out someday.”

Your wealth didn’t build itself overnight, and neither should your plans for protecting it. Estate planning isn’t just about writing a will – it’s about creating a complete system that ensures your hard-earned money reaches the right people at the right time, with minimal taxes and zero family disputes.

1. Start with the basics: Will and nomination

Your will is like your family’s instruction manual after you’re gone. Without it, the law decides who gets what – and trust me, the legal system doesn’t know your family dynamics like you do. Many people think having nominations on their mutual funds, insurance policies, and bank accounts is enough. That’s like having a spare key but no lock. Nominations help your family access funds quickly, but they don’t override your will. Your nominees become trustees who must distribute assets according to your will’s instructions. Here’s what happens without proper planning: Your spouse might have to share your assets with your parents or siblings under inheritance laws. Your children’s education fund could get stuck in legal proceedings for years. Your business partner might not be able to buy out your stake smoothly.

Set up your will first, then align all your nominations with it. Update both whenever major life events happen – marriage, children, divorce, or significant wealth changes.

2. Trusts aren’t just for the ultra-wealthy

Many Indian families think trusts are only for business houses worth hundreds of crores. That’s like thinking mutual funds are only for portfolio managers. Trusts can be powerful tools for anyone with significant assets. A family trust can help you control how your wealth gets distributed over time. Want to ensure your children focus on education before accessing their inheritance? A trust can release funds at specific ages or milestones. Worried about a spendthrift relative squandering their share? The trust can provide regular income instead of a lump sum.Trusts also offer tax advantages. Income from trust assets can be taxed at beneficiary rates, which might be lower than your current tax bracket. Plus, trusts can protect assets from creditors and legal disputes.

The setup costs might seem high initially – typically ₹50,000 to ₹2 lakhs – but consider this against potential tax savings and family harmony. For families with assets above ₹5 crores, trusts often pay for themselves within a few years.

3. Tax planning beyond your lifetime

Death doesn’t end your tax obligations – it passes them to your heirs. Your family could face significant tax bills just when they’re dealing with emotional stress. Capital gains tax is the biggest surprise for most families. If your equity portfolio has grown substantially, your heirs might owe taxes on unrealised gains. Your ₹2 crore mutual fund portfolio that started as ₹50 lakhs creates a ₹30 lakh tax liability at current rates. Life insurance becomes your tax planning superhero here. Insurance payouts are generally tax-free for beneficiaries. A term insurance policy worth ₹5 crores might cost you ₹50,000 annually but provides tax-free liquidity to your family.

Consider gifting strategies while you’re alive. You can gift ₹50,000 annually to each family member without tax implications. Gifts to your spouse and children are unlimited and tax-free. This reduces your taxable estate and lets you see your family benefit from your wealth.

4. Business succession needs special attention

If you own a business, your family’s financial security depends on smooth succession planning. Many successful businesses die with their founders because families aren’t prepared to take over. Your business partnership deed should include clear succession clauses. What happens to your stake if you’re incapacitated? Can your family sell to existing partners? At what valuation? These questions create massive disputes when answered after the fact. Key man insurance protects your business if you’re suddenly unavailable. The insurance payout can fund operations while your family or partners figure out next steps. This is especially important for service businesses where you’re the primary relationship manager.

Consider creating a family employment policy. Will your children join the business? What qualifications do they need? How will performance be measured? Clear policies prevent emotional decisions during difficult times.

5. Regular reviews keep your plan relevant

Your estate plan isn’t a fixed deposit you can forget about. Life changes, laws change, and your wealth grows. What worked when you had ₹1 crore might be completely wrong at ₹10 crores. Review your plan every three years or after major life events. New tax laws might create better strategies. Your family situation might change – new children, divorces, or deaths require plan updates. Your business might grow significantly, creating new succession challenges. Keep your advisors coordinated. Your wealth manager, chartered accountant, and lawyer should work together, not in isolation. Mixed messages from different advisors create gaps that could cost your family lakhs. Store all important documents in one accessible location. Create a master list showing where everything is kept – bank accounts, insurance policies, investment statements, and legal documents. Your family shouldn’t have to hunt for information when they’re grieving.

Making it work for you

Estate planning feels overwhelming because you’re planning for something you hope won’t happen soon. Start small but start now. Get a basic will drafted this month. List all your assets and their nominations next month. Meet with a tax advisor to understand your family’s potential obligations. The goal isn’t perfection – it’s protection. Your family deserves the same careful planning you’ve put into building wealth.

Conclusion:
Estate planning transforms potential family chaos into organized wealth transfer. Your investment discipline built your portfolio; the same discipline applied to estate planning protects it. Start with these five fundamentals, then build complexity as your wealth grows. Your family’s financial future depends on decisions you make today.