INDIA Trends and Developments Contributed by: Akshika Harikrishnan, Mohona Thakur and Nikhil Asrani, Khaitan & Co
Modern family structures: evolving estate planning needs The rise of new family structures such as single-par - ent families, blended families, single income no kids (SINKs), and dual income no kids (DINKs), demand tailor-made approaches to estate planning to achieve their unique objectives. With traditional families, the typical choice for bequeathing assets is the spouse and children. How - ever, blended families are carefully considering how to achieve a fair distribution of assets amongst the children, both biological and stepchildren. Given the complex family dynamics, without planning, there could be unintended inheritance or disinheritance. Lack of parity of stepchildren between the succes - sion laws and tax laws also complicates succession. Family arrangements and trusts are becoming popular as they achieve the desired distribution of assets. When it comes to single parents, there is no ambiguity in the succession of assets to children. However, sin - gle parents are grappling with the means to secure the child’s future and identify the right person who can act as a guardian, trustee and executor in their absence. In the case of SINKs and DINKs, with no children as natural legal heirs, succession planning involves unique considerations such as meeting their lifestyle and healthcare needs during their lifetime, identifying the right person to act as executor, trustee or power of attorney for financial and medical decisions in case of their incapacitation, and designating nominees and heirs to ensure seamless succession of assets to intended beneficiaries. Recently, including pets in one’s succession plans has gained popularity. The wellbeing and care of pets after the pet parent’s demise has become a significant concern and Indian laws do not legally recognise suc - cession to pets. This has led to the growing popularity of establishing Wills and trusts specifically designed to cater to the needs of pets with trustees and care - takers playing central roles to ensure pets receive the same level of care and attention even in the absence of their human companions. A recent example is that of the late Ratan Tata who made provisions in his Will to ensure that his dog is taken care of post his demise.
Till death do us part? Validity of pre-nups in India With changing social norms, divorce rates in India are increasing. Even “grey divorces” – ie, among adults in their 50s and above – are becoming common. In view of this, there is a growing interest in signing pre-nup - tial agreements. While such arrangements are com - mon in other parts of the world, the validity of such agreements in India is questionable as these may run contrary to personal laws and are perceived as being against public policy. Although not legally recognised, several couples are entering into marital agreements or memorandum of understanding (MOU) to avoid lengthy separation pro - ceedings. These agreements are drafted to fall within the contours of contract and personal law and lay down the division of assets (both self-acquired and inheritances) into separate and joint property. Matters such as custody, guardianship and maintenance on which courts have the prerogative to decide, should be avoided. Although courts in India have started giving importance to these arrangements, practically whether such agreements are enforceable remains ambiguous and only the courts on a case-by-case basis can determine their validity and enforceability. Given the lack of certainty with marital agreements and MOUs, private trusts and family arrangements are seen as viable alternatives to ring-fence and protect assets against any future marital separation. Family governance for passing on a legacy First-generation founders are focused on growth of the business. When transitioning from first to second generation or second to third generation, the focus shifts from wealth creation to wealth preservation. Families at the cusp of this transition are formalising their unwritten understandings through family consti - tutions or charters to provide clarity to members on their role, responsibilities and level of involvement. The governance framework brings the family together towards a common stated vision by putting in place policies and guidelines for the family and the busi - ness, thereby minimising future misunderstandings. As the family grows, it is not possible to accommo - date all members in the management of the business. Also, certain members may have interests outside of
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