Gautami Gavankar, with a rich legal and financial background, has led as CEO of Kotak Mahindra Trusteeship Services Limited and Vice President at Kotak Mahindra Bank. Her expertise in estate planning and trusteeship, combined with strategic leadership, underscores her distinguished career and extensive industry knowledge.
In a recent conversation with the Women Entrepreneurs Review Magazine, Gautami shares her insights on how financial institutions can empower women in high-net-worth families to take active roles in wealth management and decision-making. She also discusses innovative instruments like trusts for seamless succession and tailored inheritance planning for family members abroad.
In your view, how can financial institutions play a pivotal role in empowering women, particularly in high-net-worth families, to take more active roles in wealth management and decision-making?
I feel the key to empowering women in wealth management and decision-making is to provide them with the knowledge, confidence, and opportunities they need to succeed. Financial institutions, with their resources and expertise, are well-positioned to do this.
According to a recent survey undertaken to understand the financial preferences of urban Indian women, 47% of women make financial decisions on their own, reflecting the momentum in financial independence. While this marks a welcome improvement over the past few decades, we feel that there is a huge opportunity for empowering women through increased involvement in their financial affairs.
We often deal with women who could either be owners of assets through inheritance or have a joint stake in the family business and could be already involved in running the business or they could even be running their businesses. In any of these categories, financial planning/ cash flow planning for women is usually not prioritized. Further, for independent women professionals/business owners, financial planning coupled with succession and estate planning is even more crucial if they wish for their hard-earned wealth to reach the intended beneficiaries.
All of the above objectives can be achieved through personalized wealth management services that take into account the unique needs and goals of women. This includes understanding their risk tolerance, and investment goals, and providing tailored solutions accordingly.
It is also important that any and every woman in the above categories are aware of their rights, has access to financial and technological tools in their name, and is comfortable using them. Providing targeted financial education and training programs that help women understand various investment options, risk management, the importance of diversification, estate, tax planning, and philanthropy could prove to be very beneficial for empowering women.
At Kotak, our curated programs like ‘Silk’ and ‘Leading Ladies’ are steps taken to empower women. Kotak Silk is Kotak Mahindra Bank’s exclusive banking program designed to partner women in their journey towards financial independence and help them Save, Invest, Protect as well as Indulge. It offers women special pricing on safe deposit Lockers, Gold loans, Two-Wheeler loans, Personal loans & Car loans, exclusive offers and rewards on Debit card Spends. Kotak Silk endeavors to help women customers master the art of personal finance with @silk.moneymatters, an Instagram community for women.
‘Leading Ladies’ our engagement program is exclusively targeted at women clients and spouses of clients, facilitating their interaction with renowned industry experts. These are held pan India with a mix of internal and external experts and industry stalwarts and give an edge to educate on various topics such as financial planning, equity, debt, stocks, estate planning, emotional wellness, and finding one’s purpose.
In summary, improving access to capital, and creating networking opportunities and seminars can provide women with the opportunity to connect with other women investors, and philanthropists learn from their experiences, and gain confidence in their abilities to manage wealth.
*DBS Crisil survey 2024.
With the growing complexity of inter-generational wealth transfer, what innovative financial instruments or services do you foresee becoming crucial for facilitating smooth succession, such as trusts or other estate planning vehicles?
Traditionally, most business-owning families or HNI and UHNI individuals have opted for wills as a tool for succession planning. However, with the possibility of wills leading to long-drawn legal disputes among family members and the inability to plan for incapacitation coupled with multi-jurisdictional family presence and the need to ensure continuity in business succession, many families are now considering the option of creating private family trusts.
A private family trust can be established while a person is alive for the benefit of the family members as beneficiaries and the fiduciary ownership of the trust assets is passed to the trustee who in turn ensures that the intentions of the person settling the trust, for the benefit of the beneficiaries are taken care of.
In many cases, well-structured trusts can help plan for not only effective succession but also ring-fencing and protection of assets against future liabilities/marital issues and possibly protect against any reinstatement of estate duty in India. Additionally, more families have multijurisdictional presence like in the US and UK, and if assets are bequeathed to individual names by way of a will, it becomes difficult to protect these assets from UK or US taxes in the future.
In the case of business families where multiple generations are involved, it becomes imperative to have a succession plan for not only the 'ownership' but also 'management' of the business.
Family governance structures too can play a crucial role in inheritance planning. They help in aligning strategies with goals, defining roles and responsibilities, emphasizing accountability, and establishing risk management protocols. For instance, who will step into the shoes of key managerial positions, how should the next generation enter the business, the role of family members not directly involved in the business, and so on.
Some families prefer writing family charter/family constitution spelling out, inter alia, family values, family vision, decision-making process, conflict resolutions, and exit policies. However, to ensure succession is also planned, a Trust structure holding the business assets becomes vital.
What are the key considerations for HNI/UHNI families when setting up trusts, especially concerning legal frameworks, tax implications, and ensuring alignment with family values?
Setting up a trust for your family needs to be thought out carefully. Some of the points to be kept in mind are as follows:
- Objectives and what the family wants to achieve.
- Ownership: Depending on the ownership of assets in the family, the plan will have to be structured. If multiple family members are owners, then the family may need multiple structures. The structure of the trust whether revocable or irrevocable, discretionary or determinate will depend upon this, and thus it is very critical to spend time and define.
- Citizenship and residency of family members – it is important to understand and follow the laws relating to each of the jurisdictions where family members are residing or have citizenship. So be it the settlor, trustee, or the beneficiaries, planning will have to be done keeping in mind specific jurisdiction laws.
- Transition plan for assets – it is important to plan for how and when assets will be transitioned into the trusts and in the interim, a Will, will have to be put in place to take care of succession.
- Type of trusts – there are many options when it comes to trust structuring and depending on the requirements, a family may make revocable, irrevocable, discretionary, or determinate trusts or a combination of them. Families may create separate trusts for each child or depending upon the type of assets e.g. listed company shares, unlisted shares /other financial assets the number of trusts may be decided.
- Decisions relating to trustee – One of the most important decisions a family will face when establishing their trust is the selection of a trustee(s). Some individuals name themselves, a family member, a friend, or a combination of family members and a professional institutional trustee for this important role. By choosing a corporate trustee, families can ensure that current and future generations benefit from the continuity, prudence, expertise, and professionalism that a well-established organization can provide. Additionally, and most importantly trustee independence would be very critical to achieve ring fencing and protection for multiple generations.
How can banks tailor inheritance planning strategies for family members living abroad, considering diverse legal jurisdictions, tax regimes, and cultural differences?
Planning for family members living abroad presents unique challenges due to diverse inheritance laws and tax regulations across multiple jurisdictions. Navigating each of these concerns in more than one country can be a challenging task given that the laws surrounding inheritances, probate, income, and gift taxes are specific to each country.
For, the US and UK specifically have estate and gift taxes as high as 40% of the value of the estate/gift. The US, in particular, has specific laws relating to holding assets offshore coupled with taxes on global assets and often there can be onerous reporting and tax implications in the hands of the beneficiaries. The UK also has specific rules relating to assets held offshore, and concepts of clean capital and income segregation become essential for UK resident family members. Therefore, it is important to ensure that any inheritance to be received by family members in these and other countries is appropriately planned and structured.
It may be necessary to create separate wills in jurisdictions where there are assets. Every country will have its succession laws and this may lead to delayed succession or hindered succession if only one global will is created by the family. All these factors require time and comprehensive thought while planning for family members with multi-jurisdictional presence. Failing to consider these may lead to huge tax implications & delays in passing on the wealth to the intended beneficiaries.
In summary, the proper understanding of the client objectives, assets to be planned for, dealing with multi-jurisdictional implications like citizenship, domicile implications like estate/gift taxes, if family members are not in India, ring-fencing from matrimonial issues / other liabilities & multi-generation planning, have to be carried out with accurate advice from offshore and Indian advisors to ensure that both India and offshore laws are considered and the planning is legal sound and tax efficient.
In your opinion, what collaborative efforts among banking institutions and other industry leaders are essential to address the evolving needs of HNI/UHNI families in succession planning and wealth management?
In my opinion, today the wealth management industry has evolved to cater to the needs of Global Indians, who are spread across multiple jurisdictions. These UHNIs (UHNIs) need to be aware of the legal and taxation issues associated with multi-jurisdictional wealth transfers. Given the complexity of these issues, UHNIS must seek timely assistance from relevant experts like tax and legal specialists when planning and implementing a structure for estate planning.
Similarly, on the wealth management front, offshore investments undertaken by resident Indians should be executed with a comprehensive understanding of all necessary compliances, including exchange control regulations and other relevant aspects. Seeking advice from experts and professionals on these matters is key to efficient planning and for HNI/UHNI to families make informed decisions about their wealth.
