In trusts do HNWIs trust

High profile slug-fests (LIKE the Birla-Lodha spat) regarding inter-generational wealth transfers in large business families and those of high net worth individuals (HNWIs) have exposed the inadequacies of the traditional methods of estate planning.

A host of financial services providers are now stepping in to remedy this. “Many people are no longer comfortable leaving estate planning issues only to professionals such as lawyers and chartered accountants.

They’re now seeking the security of institutional backing for the entire process,” says Harpreet Singh, Business Director (Wealth Management), Centurion Bank of Punjab, which offers trusteeship, executorship and estate planning services to HNWIs with a net worth of more than $1 million (Rs 4.1 crore).

DSP Merrill Lynch Trust Services, a subsidiary of the investment bank, was among the first wealth managers to offer trusteeship services in 2007. It has around 2,000 families as clients for wealth management in India and hopes to convert some of them to clients of its trust services as well.

DSP Merrill Lynch helps to form trusts for proprietary wealth that is managed by it, while others, such as IL&FS, oversee assets managed by third parties. “We provide trusteeship for around Rs 100 crore belonging to over 20 HNWIs,” says Adrish Ghosh, Vice President, IL&FS Trust Co., which has been in the business for over three years now. SG Private Banking and a few other foreign banks are also planning to offer such services.

The attraction is the flexibility that trusts offer compared to wills.

Once a trust is formed, the trustee—in these cases, the financial services firm—becomes responsible for overseeing the management of the trust assets in accordance with the wishes of the settlor, the original owner of wealth.

The major advantage it offers is that the trust settlor can put the structure in place in his/her lifetime and, thus, avoid disputes and litigations later.