The traditional system of joint families has broken down into nuclear families. Now the concept of nuclear family structure is also changing. Being childfree is a conscious choice, and there is an increase in the number of DINKs (dual income, no children) and SINKs (single income, no children), with variations such as DINKWADs, SINKWADs, DINKWACs, SINKWACs (DINKs/ SINKs with a dog /cat), etc. emerging.
The question arises whether succession planning is relevant for DINKs and SINKs. Absolutely, and the planning considerations are unique because their goals are different. Aspects to take into account include:
Identify objectives: spending versus saving
Financial freedom is much more common among childless children because they do not have to plan for their children’s education and future. With higher disposable income there is a risk that we live in the moment and spend too much. For example, a childfree couple in their mid-forties with no active work monetized all the rental income from their ancestral properties without thinking about how such funds might support them for the rest of their lives – and the average life expectancy in India is about 71 years. year.
Financial priorities vary widely, and short-, medium- and long-term planning makes sense. It is important to prioritize the present and future and plan for lifestyle, providing for the surviving spouse, healthcare, retirement, disability and disability, especially for long-term care and assisted living (as they do not have the support system resources that traditional and nuclear families can provide).
The right succession planning tool: what, when, who, how?
Careful planning is required for childfree individuals and couples. Otherwise, there is a risk of assets being transferred to unintended beneficiaries. When planning the succession, you need to take several aspects into account.
Who manages the assets in the event of disability?
Who should the intended beneficiaries be: partner, spouse, parents, siblings, nieces, nephews, cousins, employees or even friends?
Pet care.
Supporting charities or alma mater.
Time of transfer – during life via gift, after life via will or via structures such as trusts?
Tax is also an essential consideration. Although leaving assets through wills is exempt from tax regardless of who the beneficiary is, in the case of gifts and trusts the intended beneficiaries must be ‘relatives’ as defined in tax law. Otherwise, there is a tax liability in the hands of the recipient. In one case, a couple wanted to set up a trust for the benefit of their nieces, but this was not possible because nieces and nephews are not ‘relatives’ in the context of a trust set up for their benefit. However, any direct gift or inheritance of the assets to the nieces would have been tax-free. It is worth considering whether tax and inheritance law needs to be re-examined from the perspective of evolving family structures.
In another case, a person had taken out insurance for his cousin and was paying premiums for the policy. What happens if the person dies? Who will pay the premiums? An appropriate structure or mechanism should be put in place to meet these obligations.
Choose administrators
The partner/spouse is usually the direct choice for managing a person’s wishes, whether it be managing the estate or making decisions in the event of disability or incapacity. In a traditional family environment, the children are usually the natural choice.
However, for DINKs and SINKs, it becomes critical to identify the right person(s) who can act as executor, trustee, or power of attorney for financial and medical decisions. Otherwise they could be misused. In one case, an elderly lady donated property to certain family members on the condition that they make money from it and in turn leave the proceeds to charities. Given the ambiguity in the way the will was drafted and the challenge of executing conditional bequests, the surviving relatives (who were also executors) wanted to interpret the will in a way that would benefit themselves. If not carefully planned, unscrupulous elements may attempt to take over properties and harass those who supposedly benefit from them.
When it comes to providing advance medical directives, living wills are becoming increasingly popular and record wishes regarding medical treatment in the event of terminal illness. Again, identifying the nominated representative is crucial.
Business succession
While ownership succession is important, business succession is just as relevant. For several DINKs and SINKs, career is one of the top priorities. While investing their efforts in growing the business, they must also prepare contingency plans in the event of death or disability. The choice could include taking care of family members, institutionalizing management through governing bodies or even monetizing the business at the right time.
Plan sooner rather than later
DINKs and SINKs may tend to postpone planning and may think that planning is not necessary. However, they have the advantage of accelerating their financial goals and retirement plans and being able to work backward from their target retirement age. Concluding with the words of John F. Kennedy, “The time to repair the roof is when the sun shines.” So plan now!
The author is director of Khaitan & Co. The opinions expressed are personal.
