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Are India's super rich ring-fencing their wealth using trusts?

India's super-rich are planning to pass on the reins to the next generation by setting up management trust. Is it to avoid the succession battle or the trust route can better ring-fence their wealth?

Topics
succession | Trusts | family-owned business

Krishna Veera Vanamali & Bhaswar Kumar  |  New Delhi 

Some of India’s biggest business conglomerates were started by families, such as the Tatas, Birlas and Ambanis. And most of them have gone from strength to strength, thanks to the advantages traditionally enjoyed by the family-run businesses, such as greater stability. But they are also susceptible to warfare, which can rip apart a wealthy clan -- for example, consider how things played out between Mukesh Ambani and Anil Ambani.

This is where the importance of planning comes in.

Apart from the feud between the Ambani brothers, the Bajaj family dispute and the Chettinad family dispute are some other examples of how family businesses can end up spending considerable time and resources on such squabbles.

But, do family-owned actually stop disputes from occurring in the first place. And, just as importantly, do they lead to a clear structure? Another important factor to be considered is the tax implications.

However, are smooth succession and avoiding feuds the only motives behind adopting this model of governance? The other reasons could be that some fear the re-introduction of an inheritance tax or wish to ring-fence their assets to navigate around bankruptcy laws.

According to the PwC Family Business Survey 2021, just one in every five Indian family business has a robust, documented and communicated succession plan in place. The direction taken by the Ambanis and Shriram group will inspire others in the country.

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First Published: Fri, December 03 2021. 08:15 IST
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