Case Study No 5 – Spendthrift Second Generation
- Second generation business family
- Family went through a separation in 1980 and had a amicable settlement
- He relocated to Bangalore
- Currently is a national distributor of a engineering product line
- Besides this business he has business interest in real estate and exports
- Self proclaimed low key life style but has a 11 seater hobby Aircraft worth USD 1.5 Million and bike worth 78 lacs
- The age difference between the older daughter and the younger is 18 years.
- The older daughter is spendthrift, recluse and has behavioural and temperamental issues
- He and his wife also don’t get along
Family Tree:
Assets:
- Business Assets
- Land
- Building
- Residential and commercial properties
- Financial assets
- Hobby Aircraft
- Expensive cars and bikes
Objective of Family:
- He wants to secure the interest of his wife and both the daughter.
- Does feel that the older daughter will create issues for the younger daughter, so wants a structure to secure the younger one.
- Because of the behavioural and temperamental issues he does not want to any substantial wealth to land in the older daughter’s hands.
- Wishes to secure his daughter in case post his demise wife remarries.
- Create mechanism where in the business can be sold easily without any litigation post his demise.
- Financial Support to the family members in case of demise.
- Children Education and Marriage Planning.
- Incapacitation provision to built in the structure.
Recommendations:
- Formation of 2 Private Family Trusts
- Drafting of 2 Wills for Mrs. Y & Mr. X
- Transfer of ownership from individual names to the trust
- Trustee and Protector Guideline policy
- Investment policy
- Expense Policy
Advantages:
- Succession Plan would be in place
- Assets will not devolve on to the beneficiaries directly
- Financial Security of the Beneficiaries
- Milestone needs like education marriage etc. will be provided for
- The structure would provide for contingencies like incapacitation
- Investment Policy will ensure that the money gets invested for long term and will give decent return
- Expense Policy will take care of spend thrift habits
