Trauma of Pandemic: Role of Wills, Succession Planning for Businesses and Families

The second wave of the pandemic was punishing, cruel and unprecedented. It deprived the young, healthy and the old of any closure of emotions, succession planning and even satisfaction of leaving behind a safe business and secured family.  The Covid-19 Pandemic created a situation of uncertainty and helplessness for everyone and drove businesses to the verge of collapsing. Contrary to the first wave of the pandemic, the second wave has not singled out senior citizens in respect of the severity of the disease and people of all age groups have succumbed to this disease. 

A Credit Suisse Report of 2018 revealed that India ranks third in a number of family-owned businesses around the globe. According to survey by PricewaterhouseCoopers in 2019, only 21% of these businesses have a succession plan in place. Since a significant number of these businesses do not have a business succession plan in place, it makes their families vulnerable after the untimely demise of business owners. The present pandemic needs to serve as a reminder to the business owners/proprietors for developing a succession plan to avoid unwarranted legal battles for their family members. This leads to another important reason for having a succession plan.

In the absence of a will or succession document, the assets of an individual who dies intestate are devolved upon his/her legal heirs in accordance with the law. This implies that all the legal heirs as defined in the legislations have a rightful share in the assets which may differ from the wishes of the deceased. The important acts governing intestate succession are the Indian Succession Act, 1925, Hindu Succession Act, 1956 and Muslim Law of Succession. 

Incidences of children losing both their parents and business owners of all ages losing their lives due to covid-19 are not unheard of. Family members including spouses and children have been running from pillar to post to get access of assets including bank accounts, lockers and FDRs of their deceased family members.  In some situations, both, the account holder and nominee have passed away due to covid-19 which has put children and young family members in a desperate state since they are not aware of or capable to carry out the processes for obtaining access to bank accounts, lockers or other assets. This unnecessary hassle could have been avoided if there was an executed succession document in place which entitles the legal heirs to get access to the bank accounts, lockers and insurance claims. In that case, the only assistance required would have been that of a legal professional who can provide the guidance for uses of the succession document. 

An effective succession plan for individuals involves the preparation of a Will and its registration. A Will lays down the manner in which assets of the individual shall be devolved upon his/her legal heirs. At times, additional documents such as a relinquishment deed and family settlement are also required to be executed along with a Will. 

In the case of small businesses, proprietorships or partnerships, a business succession document is a vital requirement to govern the structure, holding and management of the business in the event the business owner passes away. This document is commonly known as a family constitution. It is also important for ascertaining tax benefits/deductions for future Managers, valuation of the business, defining roles and responsibilities of the management. 

A post covid society needs reform with respect to business succession planning to secure an individual/business owners’ legacy and family. It is imperative that legal assistance be obtained for meeting these ends and no spouse, child or parent is made to run helplessly while dealing with the loss of their loved one.

While the second wave of the pandemic is weakening, a check is required to audit the magnitude of losses of life and business. Our urban centres are grappling with the sudden closure of businesses, families after families have no member left to organize property documents, a continuation of business and taking care of orphaned children. The feedback from market associations across major cities of the National Capital Territory is providing a very grim picture of the chaos which has been left behind. Every day, lawyers like us are being asked questions with regard to bank nomination, locker nomination, the usefulness of Will, differentiation between movable and immovable property and rights of minors who are left with unplanned succession due to the sudden death of even both the parents.