Warren Buffett’s Succession Plan: Here’s How Ultra HNIs Can Plan Theirs

Legendary investor Warren Buffet has chosen an heir to his vast fortune, having decided to leave his company to his son, according to media reports.

Business owners and ultra high net-worth individuals (UHNIs) need to ensure that their business is passed on smoothly without any disruption. We look at some of the steps of doing that.  

Identity All Assets

To start with, identify all assets. The strategy, which can take the form of setting up trusts, lifetime gifts, or Will, should be curated for each of the asset classes depending on the goals of the individual.

For instance, while real estate may be transferred by way of a Will owing to high stamp duty considerations, the criteria for transferring business assets may also include management experience and business acumen, in addition to a rightful share of ownership.

Establish A Family Trust 

Establishing a family trust is a smart way to protect personal wealth. Businesses can be unpredictable. A trust keeps assets safe from creditor claims. It separates ownership of assets from individuals, shielding them from personal liabilities. Assets in a trust are usually protected during insolvency because they are not part of the debtor’s estate. 

This also makes family trust a strong tool for safeguarding wealth, planning succession, and ensuring smooth business continuity.

Says Rishabh Gandhi, founder, Rishabh Gandhi and Advocates: “Governed by the Indian Trusts Act, 1882, and sections 160–164 of the Income-tax Act, 1961, family trusts also help in managing wealth centrally. They provide tax benefits through income splitting and ensures privacy by avoiding public disclosure. By skipping the probate process, trusts avoid delays in transferring wealth.”

Family trusts serve specific purposes, such as securing finances for minors, elderly dependents, or individuals with disabilities. An irrevocable trust offers even greater protection by permanently removing assets from the settlor’s estate, reducing estate taxes. 

Says Gandhi: “These trusts simplify managing wealth across generations and ensure smooth business operations. Prominent families, like the Tatas, use family trusts effectively to handle their assets. When set up properly, family trusts offer strong legal and financial protection. They are an essential tool for preserving and efficiently transferring wealth,” says Gandhi. 

Make A Will 

Ensure you cover all movable and immovable properties.

Follow your personal laws; Muslims can will up to one-third of their property, while Hindus can will their entire estate. Include a residual clause to account for future properties or assets. Appoint a trusted executor to implement your wishes. Ensure two witnesses sign the Will, preferably younger by at least 10 years, to ensure their availability later. 

Adds Gandhi: “Attach a doctor’s certificate confirming your physical and mental fitness at the time of execution. Registering the Will is advisable, even though not mandatory, to minimise disputes. Use a codicil to update the Will when acquiring new assets or making changes. Careful planning ensures smooth succession and avoids conflicts.” 

Create Alternative Investment Opportunities 

The importance of building and maintaining non-core revenue streams has been well recognised in recent times, particularly by the next generation. Families should identify and appoint trusted family advisors to help identify growth opportunities and ensure appropriate asset diversification. 

Says Radhika Gaggar, partner (co-head - private client), Cyril Amarchand Mangaldas: “We have already seen this in the form of certain prominent Indian families, who set up family offices which serve as “patient capital” and provide alternate investment opportunities and income streams to the family. Additionally, families can consider undertaking family governance exercises culminating in a family constitution, which outlines the core values and goals of the family.”

This ensures that any diversification in the future does not come at the cost of the family values, thereby protecting the family’s legacy.

Mistakes To Avoid

The most common mistake made by Indian families is avoiding open discussions about succession planning. Owing to the inherent anxiety and taboo surrounding death, and by extension succession planning, individuals tend to put off these conversations, leading to misunderstandings or conflicts between family members at a later date. 

“Another common mistake made is to blindly copy the succession plan or structure adopted by another family; as each family and its dynamics are different, the succession plan necessarily needs to be a bespoke one,” says Gaggar.