Let's see if establishing a company is a convenient way to transfer your assets to your successors and what are the other options available
13-Dec-2022 •Ashish Menon
Can I set up a company to hold all my assets (shares, mutual fund units, home, etc), and will the passing on those assets to heirs be easy in comparison to the simple 'will'? - Abhishek Dhumal
From a compliance standpoint, creating a company to handle your assets and their transfer to your legal heirs can be extremely laborious.
You can create a will or set up a private trust instead.
While both have their own benefits, let's look at what they are and under what circumstances are they best suited.
What is a will?
Law defines will as "the legal declaration of intention of a testor with respect to his property which he desires to be carried into effect after his death".
Creating a will is straightforward. A lawyer can help you in drafting your will and getting it notarised. You have to specify the persons to whom you wish to transfer your property and in what proportion. The only drawback is that wills can be contested in a court of law and can lead to long drawn legal battles especially when there is bad blood between the legal heirs. However, if the will is not contested, then the executor can execute it at any time after the death of the testor.
What are private trusts?
Private trusts are more efficient from various perspectives. A family trust set up for the benefit of the family members is the most common purpose of a private trust. The purpose is to progressively transfer the assets so that you don't own any assets legally but through the trust, and the beneficiaries get the benefits from the assets. You will have to appoint trustees, who will manage the assets held under the trust. There are various types of trusts depending upon the rights of the settlor and benefits enjoyed by the beneficiaries.
Setting up a company to manage your assets and their transfer to your legal heirs can be quite cumbersome from a compliance perspective. You would be better off using a will or a trust or even a combination of both. It is possible to set up a trust through a will where the assets would be transferred to a trust created based on your instructions in the will. If there is a substantial amount of assets and it is likely that the will might be contested then you would be better off setting up a family trust and registering it.
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