Estate planning in India is very reactive, and no one pays attention to how to plan it effectively. Business families don’t start planning for their estates until it’s too late and miss out on major factors that could systematically grow their wealth and a smooth transfer to the future generation. So, let’s understand the various considerations for estate planning in detail.
Legacy gaps in affluent families
Maintaining a large estate is challenging, and if there is no proper planning for transferring the legacy, the future of estates is dark. With no proper family structure, estates face probate delays and family disputes.
Before understanding why it is delayed, it is crucial to understand the specifics of a probate.
- A probate is the legal process through which a deceased person’s will is validated by the court, and their assets are distributed according to the terms of the will.
- If there is no will, the assets are distributed according to the laws of intestacy. The probate court checks the whole process, right from the execution of the will, payment of debts, and distribution of assets to the rightful beneficiaries.
The process of filing a probate range from 6 to 12 months in India. It is a long process and can be delayed further due to family disputes and legal processes. Here are a few reasons why probates are delayed:
- Large estates – If the number of estates is large or if the assets are difficult to evaluate, the process can take longer than anticipated.
- No will – Large estates without a will is like an unlearned child. With no direction, wills can be contested, and the probate process is further delayed.
- Court backlogs – Probate courts have thousands of cases to deal with every day, and expediting this process is not in your hands.
- Pending debts or tax payments – If the estate has any large debts or tax obligations, it takes longer to settle these liabilities before it is distributed to the beneficiaries.
To avoid these probate delays, adding nominees for assets is one of the ways to do it. With nominees in place, everyone in the family is aware of how the assets will be distributed.
Regulatory tailwinds demanding urgency
India doesn’t levy any inheritance tax on any estates, but there is an ongoing debate but no official proposal with possibilities of its return.
The story of inheritance tax was reignited when Sam Pitroda in 2024, who is the advisor to the Indian Overseas Congress, proposed a 15% inheritance tax on the super-rich. The opposition and the Prime Minister quickly refuted the proposal.
The current government is not in favour of this system, but there is a high chance that in the future, administrations will revisit estate duties with rising wealth inequality and electoral populism.
Wealth tax and estate duties were abolished way back in 2015 and 1985, as too much effort went into tracking ownership of assets. Without any digital tracking system, the admin cost of tracking wealth or inheritance outweighed the actual revenue earned.
However, with evolving digital records and advanced property valuation methods, these taxes can make a comeback. Digital payments, financial institution reporting (eg – Form 26AS, AIS) also make it difficult to conceal assets. Along with that, income tax records, real estate transactions, and bank data are now cross-verifiable, which makes enforcement more practical.
Hence, it is important now more than ever to strategize about your estates with digital tracking systems, potential comeback of inheritance taxes, and how to be prepared for it.
Moving from reactive to proactive
Estate planning in India takes a backseat for several reasons. It can be that the primary wealth holder is reluctant to write a will, or once it is written, they think everything is sorted across generations, and no one is going to argue about it in the family.
There are taboos in Indian joint families where discussions about death or inheritance don't happen until the time comes. Without any clear communication – the future generation faces chaos. As a result, reactive planning results in forced asset sales, family disputes, probate delays, and court battles.
In short, it’s a “patch it when it breaks” approach, and by then, the cost (emotional and financial) is steep.
Treating the estate as a living portfolio with active governance is important. Your estate plan must evolve in a dynamic environment where priorities, heirs, and needs change. Reviewing your plan every 3 years helps you adapt to the current situation and make changes accordingly.
An effective estate plan follows the 3Cs:
- Clarity: Everyone knows the “why” and “how” behind the plan.
- Continuity: Structures like family trusts or councils carry the legacy forward.
- Control: You design the flow of assets, values, and decision-making power.
Framework for comprehensive estate design
Here is a list of strategies that will help in building a detailed estate plan across generations:
1. Wills – the Essential Baseline
As discussed above, a will is the north star of any estate or legacy plan. A will is less likely to be contested if it identifies the testator, executor, asset allocations, and beneficiaries. After a will is made, it must be probated in the relevant district court. This is another lengthy legal process, but it is necessary to avoid any further delays in estate transfer.
2. Private Family Trusts – Ring-fencing & Continuity*
According to a 2024 report, over 30 percent of high-net-worth individuals (HNIs) in India are integrating trusts into their financial structures to mitigate risks and ensure wealth preservation.
A private trust in India is an effective legal mechanism to protect long-term assets, succession planning, and financial management. Individuals opt for private trusts for a smooth transfer of wealth across generations.
Private trusts also offer asset protection from litigation risks or creditor claims. Another key advantage is assigning a part of the wealth to a competent trustee. It is useful in cases of minor children, elderly parents, or dependents with special needs.
Ring-fencing is a proven strategy that protects personal assets and keeps it separate from business liabilities and risks. Private trusts are a suitable option to implement ring-fencing strategies. In this way, if a business is under crisis at any point in time, the personal assets are not affected by it.
Private family trusts also assist with tax compliance, and the income is distributed strategically to avoid any tax burdens. Let’s understand the different types of trusts applicable in India:
- Revocable trusts can be altered or revoked by the settlor during their lifetime.
- Irrevocable trusts, once executed, cannot be changed or revoked without the settlor’s consent. It is a better option to protect assets and segregate it fairly.
- Testamentary trusts are made through wills. It comes into effect after the death of the settlor.
- Inter-vivos trusts or living trusts are formed during the lifetime of the settlor and enforced immediately.
* Tax implications depend on trust structure and must be reviewed by a qualified tax advisor
3. Holding Companies & LLPs – Sheltering Operating Assets
Limited Liability Partnerships and Holding Companies are widely used by family businesses in India to maintain control while gifting portions of ownership to heirs. They also help in lowering the value of those gifts for tax purposes through valuation discounts to transfer more wealth using less of your lifetime exemption.
Business owners usually place operating assets like real estate, shares, and operating businesses into LLPs or private limited companies. This strategy is another way to protect personal wealth from business liabilities.
4. Philanthropy Vehicles – Codifying Family Values
Philanthropy activities have been in the books of financial planning in estates for a long time. Associating with a charitable trust or section 8 companies are the ways philanthropy is supported in India.
Charitable Trusts
A charitable trust helps the settlor transfer their assets into the trust for charitable purposes. Trustees manage the trust and carry out its designated objectives. The trust is made for public welfare and used for education, healthcare, religion, or poverty.
The income generated from the charitable trust is tax-exempt under Sections 11 & 12 of the Income Tax Act. Business families opt for charitable trusts to manage giving over generations and have long-term control over how funds are distributed.
Section 8 Companies
A Section 8 company is a non-profit company that uses its profits for charity. It can be for art, science, religion, or social welfare. Section 8 companies work the same way as normal companies, but they cannot distribute profits to their members.
It is beneficial for business families to collaborate or invest in Section 8 companies. It offers a stronger governance framework than a charitable trust, along with more credibility and transparency, which is preferred by donors, partners, and regulators.
Liquidity and Tax-Funding Strategy
When business families think about estate planning, they focus on primary concerns like taxes, asset protection, or succession strategy. However, they miss out on one of the most overlooked risks – liquidity.
In the context of estate planning, liquidity is important when there are taxes and other obligations to look after. Without adequate cash available, heirs may be forced to sell valuable assets under pressure and below market value. In this case, life insurance is effective. It is a tax-efficient and an immediate source of cash when it’s needed the most – usually outside of probate. Let’s understand how:
Use Life Insurance to Cover Taxes and Expenses
A life insurance policy can help pay estate taxes and other settlement costs, so heirs don’t have to sell property or investments.
Place the Policy in a Trust
Putting the insurance in an Irrevocable Life Insurance Trust (ILIT) keeps the payout outside your taxable estate. This gives your family cash when needed, with added protection from creditors and more control over how the money is used.
Finance the Premiums
Instead of using your own money, you can take a loan to pay the insurance premiums. This helps preserve your capital and keeps your financial plan more flexible.
Governance architecture
Family Council and Charter
Large estates and business families call for complex estate decisions that one must make for future generations. Hence, having regular conversations that guide how your family handles wealth is necessary. It keeps everyone on the same page to avoid disputes.
Corporate trustee and independent guardians
When you have large estates to handle, a corporate trustee or independent guardian eases your burden of processes that go for months (or years). A corporate trustee is considered by business families for transparent accounting, decision-making, and tax planning. They serve the needs of the trust’s beneficiaries in managing the assets fairly. If you have minor children, it's important to name a guardian in your will to care for them in the event of your death.
Succession readiness scorecard
Your legacy plan should be regularly updated and not left to collect dust. As life changes (marriages, births, new business ventures, changes in law), everything requires adjustments.
Here are a few questions to check periodically if a proper estate plan is in place:
Will & Testament Status
- Has a legally valid will been executed?
- Is it updated for the current asset base, dependents, and wishes?
Trust Structures
- Are there private family trusts in place?
- Do they clearly define beneficiaries, trustees, and distribution rules?
Asset Titling & Documentation
- Are property titles, investments, and nominee details accurate and consistent?
- Have digital and non-physical assets been accounted for?
Liquidity for Settlement
- Have provisions been made for estate tax (if reintroduced), legal fees, and equalisation?
- Is there life insurance or corpus earmarked for this?
Review Cycle
- When was the last estate plan audit done?
- Is there a process in place for periodic updates?
Build a Succession Plan with Experts from Shriram Wealth
At Shriram Wealth, we understand that legacy isn’t only about assets- it’s about values, vision, and continuity. Our estate planning solutions are designed to help you preserve wealth with clarity, harmony, and control across generations. Speak to our team of experts today to start building a succession plan that grows with you and endures beyond you.
