Dr. Richa Mehta
This Pandemic has taught each one much more than one could grasp in many ways. The deadly Second wave has turned out to be the most devastating one for the entire country. Few survived this blow; few succumbed to the deadly virus and many were orphaned during this tsunami of Delta Variant. It has not been easy for survivors; many of them are old parents, who are left in a lurch as they lost their sole young bread-earner of the family or leaving them to face debt issues, which they were unaware of. Such a grim situation has made a lot of people think about securing their assets and wealth from an unseen monster.
In general, there has been a spike in consultation with professional agencies for seeking advice on succession planning and creating a wealth pool for the successors after the person’s untimely demise. The concept of making a WILL is not new, nor the thought to make it more viable, then what is it that is pushing people to approach professionals with the intent to get WILL drafted by an experienced lawyer instead of making it themselves. Professional touch, finesse, and impeccable drafting make a simple desire into a well-executed proper document. A registered WILL can reduce the rate of family disputes which usually arise after the demise of the head of the family. It is seen that the most preferred way is through getting the WILL document registered for the safety and security of the family.
We are all aware of the incongruous issues that crop up especially when large business empires lose their head of the business unexpectedly, the lack of succession and estate planning while passing on the baton to successors stares in the face, with the result long-haul legal disputes emerge.
Today’s businessman is wiser and understands the implications of segregating personal assets from the business since the Apex Court has ruled that invocation of personal guarantee may extend to their personal assets. While assets are passed on as per desire and succession, debt also passes on, leaving families with great difficulty handling such a situation. Legal heirs are liable for the debt of the deceased too, if a businessman gives a personal guarantee for financial assistance taken from Bank Conglomerates, invocation of guarantee may extend to their personal assets. Therefore, firstly it is vital to segregate personal assets from the business.
Hon’ble Supreme Court recently ruled in the case of Lalit Kumar Jain vs. Union of India, that the approval of a resolution plan (under the Insolvency and Bankruptcy Code, 2016) does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract/Agreement. The Supreme Court also observed that approval of resolution plans under the Insolvency and Bankruptcy Code, 2016, does not discharge personal guarantors from their liability.
More and more prominent big business houses prefer to create Asset Protection Trust due to its ability to ring-fence against claims of future creditors. This phenomenon is still not very common or popular in India, but creating Trust for the protection of assets is common in Western countries. The purpose of an asset protection trust is to isolate personal assets from creditors. An asset protection trust is normally structured so to reduce the risk from creditors. The Indian Trusts Act, 1882, governs the formation of a Private Trust. The deed needs to be registered with an appropriate authority only if an immovable property is passed on to the Trust. Such documents shall be drafted by experienced Lawyers/Solicitors practicing in this area to ensure the legal validity of the Trust deed.
Whether it is a traditional way or creating WILL or a more advanced way of setting up a Private Trust, each category of people has their preferred style of channelizing their life earnings, what is significant is to create some legit legal document to protect your loved ones from unseen harassment after the untimely demise.