Succession planning for India's first-generation UHNIs: A legacy beyond wealth

As India’s ultra-high-net-worth individuals (UHNIs) continue to rise in number, so do the complexities of succession planning. The Knight Frank Wealth Report 2024 highlights a 50% growth in India’s UHNI population from 13,263 in 2023 to 19,908 by 2028. This surge, fueled by first-generation wealth creators, underscores a pressing challenge: how to ensure their wealth, values, and vision endure across generations.

For India’s wealthiest families, succession planning involves more than the distribution of assets. It’s about embedding family values, addressing governance in family businesses, and preparing heirs for stewardship. 

Governance: Preventing conflict before it starts

Complex family dynamics can derail succession planning if not addressed proactively. Studies have shown that globally, 70% of family businesses fail to transition successfully to the second generation, often due to the absence of governance frameworks. In India, heads of family frequently delay succession planning, assuming that their family structures are too simple to require it or to avoid potentially contentious conversations. Our recommendation is that succession plans should be created early on when family relationship dynamics are harmonious and simple, rather than in times of complexity or crisis.

Multi-family Offices (MFOs) play a critical role in establishing governance structures such as family charters, advisory boards, and clear role definitions. These tools ensure transparency, mitigate conflict, and enable smoother transitions. 

Legacy and family values: Bridging the gap

Embedding family values into succession plans is a well-established practice in the West; however, it remains underexplored among Indian UHNIs. While a majority among India’s wealthy believe in passing on family values through word of mouth or personal interactions, they do not prioritise documenting these as part of their succession planning.

Family offices, however, are beginning to nudge families toward a more holistic approach. For instance, advisors suggest incorporating stipulations in wills and trusts that tie inheritance to adherence to family values or philanthropic activities. This ensures that wealth serves not just the individual but also reflects the family’s ethos.

In recent times, clients have gradually begun to understand the importance of passing down not just wealth but the principles that shaped it. Structured discussions around this can create a balance between financial goals and legacy aspirations. 

The role of philanthropy in succession

Philanthropy is emerging as a vital component of succession planning among Indian UHNIs. The India Philanthropy Report 2024, published by Bain & Company, highlights that Indian ultra-high-net-worth individuals have significantly increased their philanthropic contributions in recent years. For instance, donations from UHNIs grew by more than 60% in FY 2023.

Incorporating philanthropy into succession plans ensures that wealth contributes to societal good while preserving the family’s legacy. While we are yet to see Indian UHNIs match their Western counterparts in terms of integrating philanthropy in their succession planning, some families have begun to link inheritances to philanthropic commitments, creating a culture of giving that endures across generations. Family offices facilitate this by setting up charitable trusts or foundations that allow families to support causes aligned with their values.

Heir preparation: Mentorship and financial literacy

A well-documented challenge in succession planning is the lack of preparedness among heirs. More than 50% of those who expect to inherit a share of the “great wealth transfer” over the next two decades say they aren’t prepared to manage the money, according to multiple studies and surveys. Indian UHNIs are no exception, with many families grappling with heirs who don’t have an interest in financial management or managing the family assets.

To address this, MFOs can provide mentorship and structured programs for heirs, focused on investments, risk management, and stewardship. These programs empower heirs to make informed decisions and align with the family’s long-term vision.

It’s not just about teaching technical skills. It’s about instilling a sense of responsibility and helping the next generation understand the impact of their decisions. However, mentorship is successful only when the heirs acknowledge the need for it and approach MFOs themselves.

Professionalising family businesses

There is a growing trend among India’s UHNIs to bring in professional management for their family businesses, to ensure business continuity across generations. Traditionally, leadership roles were reserved for family members, but this is gradually changing with the next generation wanting to explore domains beyond the family business. 

For example, families may look to successful models like Mahindra & Mahindra, where majority ownership remains within the family, but day-to-day operations are managed by professionals. This separation of ownership and operations reduces internal conflict, preserves business value, and allows family members to focus on long-term strategy.

Professionalising management while maintaining family oversight is critical for both business sustainability and personal relationships within the family.

Simplifying wealth transfers

India’s regulatory environment offers both opportunities and challenges for wealth transfer. Advisors like MFOs can recommend suitable structures to mitigate higher costs and risk. Proactive planning is key. Structured transfers, guided by experienced advisors, can minimise tax liabilities and create a secure foundation for future generations.

A future-ready approach

As India’s UHNI population grows, so does the importance of adopting future-ready succession strategies. Families must balance traditional practices with modern tools, integrating governance frameworks, professional management, philanthropy, and mentorship into their plans.

Multi-family offices are uniquely positioned to guide this journey, offering personalised solutions that reflect each family’s unique dynamics and aspirations. By addressing both financial and non-financial goals, India’s wealth creators can ensure their legacies endure—far beyond their wealth.

(Rajmohan Krishnan is the Principal Founder and Managing Director at Entrust.)