Shaleen ShahFamily trusts in India are an essential tool for wealth management, succession planning, and asset protection within families. Family Trusts can also help senior citizens and their NRI children manage properties in India.
Amara Raja Energy & Mobility is the latest to opt for the increasingly popular family trust route to secure wealth for promoters. The company’s ageing patriarch, Ramachandra Naidu Galla, 86, transferred the promoter entity’s 33% holding to four new family trusts, which, according to a filing to the stock exchanges last week, are aimed at a “structured and seamless intergenerational succession… so as to eradicate the possibility of future conflict”. Galla will be the controlling trustee which should help in consolidating and ring-fencing the ownership of family assets. The need for setting up the trusts was long overdue as the third generation of the family has joined the business and is part of the company’s board.
This route to succession planning has many advantages as family trusts help by providing a structured way to manage and distribute family wealth across generations, protecting assets from creditors, and ensuring that the assets are distributed according to the patriarch’s or matriarch’s wishes, all while potentially avoiding the lengthy probate after his/her death; essentially safeguarding the family’s financial future by allowing controlled access to assets for beneficiaries as needed. And unlike wills, trust details are generally not public record and therefore can be helpful in avoiding public glare.
To ensure family trusts achieve their intended objectives, the Trust Deed must be drafted very carefully. And it is imperative that the trustees/beneficiaries who are family members comply with corporate governance: meetings are held formally, quorums are present, and decisions and resolutions are minuted. These trusts should not be operated as the alter ego of the family members concerned.
