Will vs trust: Which one is right for my estate?

I am a textile merchant and I want to plan my estate in a way that it protects my wife, parents, and daughter after my death. What are the different things I should look out for?
 

Planning your estate ensures your assets are protected and your family's future is secure. Here are key elements to consider for a comprehensive estate plan:

Will: Will is a legally binding document that delineates the distribution of an individual's assets and property following their demise. This document allows individuals to designate specific beneficiaries, appoint an executor responsible for fulfilling their directives, and make arrangements for minor children or dependents.

Family trusts: Family trusts are legal entities that manage and oversee assets on behalf of designated beneficiaries through one or multiple trusts. These structures provide several advantages, including asset protection, tax optimisation, and controlled distribution of wealth. Trusts may be categorised as revocable or irrevocable, and individuals have the option to establish specific conditions governing the disbursement of assets.

Also read: Why do business families delay the inevitable: Succession planning?

Power of attorney: A power of attorney is a legal instrument that empowers an individual (the agent or attorney-in-fact) to make financial or legal decisions on behalf of the person who executes the document. The scope of this authority can be either general or limited, tailored to the specific needs and preferences of the individual.

Succession planning: Succession planning is especially vital for business owners. It entails formulating a strategy for the seamless transfer of ownership and management of the business to the next generation or a designated successor. This proactive approach ensures business continuity and minimises potential disruptions during the transition process.

Also read: Wills and trusts: How blended families can navigate succession planning
 

Should I opt for a will or a private trust to protect my estate. Which one is the most effective tool?

Wills and trusts should not be viewed as competing alternatives; rather, the choice between the two depends on what is most suitable for your estate.

• For small estates with straightforward assets, a will may often be the simplest and most cost-effective option.
• Nevertheless, the two can sometimes complement each other. For instance, if a trust does not cover certain assets, those assets may go through probate. Having a will ensures that any overlooked assets are accounted for, providing an extra layer of protection.
  
  Also read: Avoiding the patriarch trap: Lessons in succession planning for Adani and Ambani
• Using both a will and a trust can simplify asset transfer, reduce financial and administrative burdens, and maintain confidentiality. A will ensures assets not included in the trust are properly distributed, while the trust structure offers additional benefits like controlled wealth management and tax efficiency.

Aditya Chopra, Managing Partner and Moxy Shah, Associate, The Victoriam Legalis.