Do DINK and SINK families need succession planning?

The traditional joint family system is breaking down into nuclear families. Now the concept of nuclear family structure is also changing. Being childless is a conscious choice, and there has been a rise in DINK (dual income, no children) and SINK (single income, no children), with variations such as DINKWAD, SINKWAD, DINKWAC, SINKWAC (DINK/Dog/Cat SINK) etc. arising.

The question arises whether succession planning is relevant for DINKs and SINKs. Absolutely, and planning considerations are unique because their goals are different. Aspects to consider include:

Set Goals: Spending vs. Savings

Financial freedom is much more common among people who don’t have children because they don’t have to plan for their children’s education and future. With higher disposable income, there is a risk of “living in the moment” and overspending. For example, a childless couple in their mid-40s with no active employment monetized their entire rent-generating ancestral property without thinking about how such funds would support them for the rest of their lives, and the average life expectancy in India is ~71 years. years.

Financial priorities are very different and planning for the short, medium and long term is smart. It is important to prioritize the present and future and plan for a lifestyle that includes a surviving spouse, healthcare, retirement, disability, and disability, especially for long-term care and assisted living (as they do not have a support system). that traditional and nuclear families can provide).

The right succession planning tool: What, when, who, how?

For individuals and couples without children, careful planning is required. Otherwise, there is a risk that assets may pass to unintended beneficiaries. There are various aspects to consider when planning for succession.

In the event of incapacity, who will manage the assets?

Who should be the intended beneficiaries: partner, spouse, parents, siblings, nephews, nieces, cousins, employees or even friends?

Pet care.

Support charities or alma mater.

Timing of transfer – during life through a gift, after life through a will, or through structures such as trusts?

Tax is also an important factor. Although bequests of assets under a will are tax-free regardless of who the beneficiary is, in the case of gifts and trusts, the intended beneficiaries must be “relatives” as defined in the tax laws. Otherwise, the tax liability falls on the recipient. In one case, a couple wanted to create a trust for the benefit of their nieces, but this was not possible because nieces and nephews are not “relatives” in the context of a trust created for their benefit. However, any direct gift or bequest of assets to nieces would not be taxable. It is worth considering whether tax and inheritance laws should be reviewed in relation to the development of family structures.

In another case, a man took out insurance for his nephew and paid the premiums on the policy. What happens if a person dies? Who will pay the premiums? To service such obligations, it is necessary to create an appropriate structure or mechanism.

Selecting Administrators

The partner/spouse is usually the direct choice to carry out wishes, whether it be managing property or making decisions in the event of disability or incapacity. In a traditional family, children are usually the natural choice.

However, for DINKs and SINKs, identifying the appropriate person(s) to serve as executor, trustee, or proxy for financial and health care decisions becomes critical. Otherwise they could be used. In one case, an elderly woman bequeathed assets to certain relatives with the understanding that they would monetize and in turn bequeath the proceeds to charity. Given the ambiguity of making a will and the difficulty of executing a conditional will, the relatives (who were also executors) wanted to interpret the will in a way that would benefit themselves. If not planned carefully, unscrupulous elements may try to take over the property and harass the people who should benefit from it.

When it comes to providing advance directives, living wills are becoming popular and reflect wishes regarding medical treatment in the event of a terminal illness. Here, too, the identification of the designated representative is critical.

Business succession

While ownership continuity is important, business continuity is equally important. For some DINKs and SINKs, career is one of their top priorities. While investing in business development, they must also plan for the event of death or incapacity. The choice may be caring for relatives, institutionalizing management through governing bodies, or even monetizing the business at the appropriate time.

Plan sooner rather than later.

DINKs and SINKs may have a tendency to delay planning and may believe that planning is not required. However, they have the advantage of accelerating the achievement of financial goals and retirement plans and can work backwards from your intended retirement age. In the words of John F. Kennedy, “The time to repair your roof is when the sun is shining.” So, plan now!

The author is the director of Khaitan & Co. The opinions expressed are personal.