Family values for transfer of wealth

Rules on the use of trusts to transfer wealth and income to non-resident family members must be read within the larger context of capital controls for individuals. Family trusts serve as an efficient means for succession planning. Yet, when they come up against forex conservation limits, regulatory intent must be upheld. The intent should, however, accommodate the rising trend of rich Indians surrendering citizenship, who may have genuine claim on swift transfer of income earned or wealth accrued in India. Transfers need to be timely and tax-efficient for effective estate planning, and financial intermediaries must smoothen the process to the extent provided in law. Restraint is also required in the use of family trusts not becoming a means to circumvent controls. Regulatory response is guided by abuse prevention, and it makes sense not to unduly stretch the role of family trusts.

Family businesses occupy a special place in the Indian economy. Regulations have, on occasion, displayed a heightened sensitivity to the nature of domestic entrepreneurship. Corporate governance standards have been adapted to suit Indian reality. The country is on course to creating a sizeable number of HNIs whose interests need to be secured through receptive regulation over business control. Succession plays a key role here, and capital controls can be structured to encourage entrepreneurship. Even existing guidelines can be interpreted to serve the interests of domestic business interests in light of the prevalence of family-run corporations.

Of course, capital controls are dynamic, and their restrictions on succession planning are transient. India has considerably liberalised remittance limits. Further easing is a matter of time. The issue confronting members of business families renouncing Indian citizenship could abate if macro conditions allow financial regulators more elbow room over merits of individual cases. India has a record of conservative financial regulation that provides a reasonable tolerance band.