💰 The Great Indian Succession Plan
Will Ambani's Succession Plan be as successful as his business?
Death is the ultimate reality.
Maybe money can solve most problems. But against this formidable force, it is powerless.
And even Asia's second-richest man knows he cannot avoid it. Mukesh Ambani, who has built an empire worth over Rs. 15 lakh crores, wants to have some control over his business even after his death. How?
Through succession planning!Â
What is Succession Planning?
Before we go ahead and tell you what Ambani's succession plan looks like, let us understand what succession planning is.
When someone dies, they leave their possessions behind. Since it belonged to them, they have the right to decide what to do with it after they are gone.Â
This is why you're asked to decide nominees when you're creating an FD or filling in your insurance policy. It is your nominees who will inherit these possessions.
But that is not enough. You may have countless other possessions like your house, your business, your equity shares. These need to be divided up among your family members as well.Â
Wondering what happens if you don't do this?
It could lead to a civil war among family members over your assets. Many uber-rich families have seen such succession wars and the Ambani family is no different.
When Reliance founder Dhirubhai Ambani died in 2002, his two sons Mukesh Ambani and Anil Ambani got involved in a cold war over who would control the business. The issue was ultimately settled three years later by their mother, who proposed that they divide up the business.Â
Yeah, sounds like something straight out of a TV serial. Reality is often stranger than fiction itself.
Now, Ambani definitely doesn't want to see this process repeated with his own three children. So, the 64-year-old is planning ahead.
How is Succession Planning Done?
We've all heard about wills and seen will readings in TV shows and movies. But this is not the only way to declare who will get control over your possessions.
You can also set up a trust while you're alive and transfer your assets to it. The managers of the trust will be responsible for taking care of these assets and dividing them up when the time comes.
Wondering why you don't see this aspect of estate planning in movies? Because it isn't as dramatic as a will reading. But it is often more lucrative. You see, a person can specify the exact purpose for which trust money can be used. This helps in better planning for the future, unlike a will, which can only be used for wealth distribution. And so, this is the method Ambani has chosen.
According to Bloomberg, Ambani is considering moving all his family's assets and holdings into a trust-like structure. This trust will then control Reliance Industries Ltd. Wait, what? So, who will control the family business now?
Ambani, his wife, and his children will have stakes in the new trust. So, don't worry, they will still have control over Reliance Industries.Â
This plan is very popular with rich families who have a lot of assets that need to be managed and divided with a lot of caution. Plus, once the assets are in a trust, they can't be used to pay off any of your debts.
Sam Walton, who has inspired Ambani's current plan, transferred 80% of his business to his children 40 years before his death. The move ensured that the family continued to control the business. And the plan worked! The Walton family still owns 47% of Walmart and is the richest family in the US.
While the Walton family might be a success, many times estate planning can go horribly wrong.
For instance, actor Heath Ledger had created a will long before his death. But forgot to update it after his daughter was born. This caused several fights over his estate after his death.
Michael Jackson had also prepared for his demise by creating a trust. But he didn't transfer a lot of his assets to the trust. Cue: Fights among family members.
Hopefully, Ambani won't make the same mistakes.Â
But the real question is will Isha, Akash, and Anant Ambani be able to shoulder the legacy created by Dhirubhai and Mukesh Ambani?
Only time will tell…
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