Making informed, unbiased decisions is critical, but often, our fear, comfort, and bias take us away from critical planning. Take, for example, the choice between a holiday in London and designing an estate plan: most people would choose the former to avoid the difficult decisions and complexities of estate planning. An estate plan is about preserving and distributing your wealth to your loved ones during and after your lifetime, ensuring that your assets are passed on according to your wishes while minimizing legal complications. Despite its importance, many people do not give it the importance it deserves. Let’s explore the reasons behind this reluctance.
Coming to grips with one’s mortality is never easy. Although it can be difficult to discuss such a topic, especially among your family, it does not prevent the event from happening if it is not discussed at all. Just as you strategize for accumulating and managing wealth, it is wise to create an expansion plan to ensure a seamless transfer of assets to your loved ones.
Drawing up an estate plan is about deciding who gets the asset from your estate. You need to consider the future realistically by considering these likely scenarios: what is the likelihood that your spouse will remarry? What if your child died unexpectedly? What happens if there is a divorce in the family? Do you want to leave significant assets to a family member who is spending or has bad habits? Such and many more questions that call for emotional decisions have to be taken but this should not stop you from making a decision at all because you lose control of who gets what at all.
Investors mistakenly believe that estate planning is reserved for the super-rich or families with complex relationships and cross-border assets. In fact, an estate plan is essential for anyone with assets who want to pass them on to loved ones.
As much as we may want to believe that we are rational individuals, we often tend to base our decisions on our biases that do not necessarily lead to rational decisions. For example, many people are of the opinion that since their ancestors never made an estate plan, it is not necessary, unless they acknowledge the changes in the regulatory framework, the complexity of the assets and the value system among the generations. Another common tendency is to discuss matters related to the distribution of wealth among family members leading to family disputes. Conflict occurs when there is a difference of opinion, and we must understand that sometimes it is right to agree to disagree. Often times, a healthy discussion can lead to different opinions also facing a constructive conflict that can benefit the family because all family members are allowed to express their thoughts and opinions . This may indeed reduce destructive conflicts in the future.
Society’s perceived gender roles often lead to the misconception that one person is responsible for wealth and succession planning. Women should recognize the need for an estate plan, especially if they have assets in their name. Even if women have fewer assets compared to their male counterparts, an estate plan is essential. Such plans are vital, taking into account the potential for substantial future legacies.
Many people underestimate the need for an estate plan due to a lack of awareness. Some people believe that naming beneficiaries is enough, ignoring the importance of a comprehensive will. Without a will, the laws of intestate succession dictate the distribution of assets, emphasizing the importance of a tailored estate plan so that your wealth is inherited according to your wishes with the inheritances you want. By overcoming these inhibitions and preconceived notions, you can protect your family’s interests. An estate plan not only ensures a smooth transfer of wealth but also shields your family from unnecessary financial and emotional hardship.
Sneha Makhija is the head of wealth planning, Sanctum Wealth.
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Updated: 19 November 2023, 10:44 PM IST
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