Share wealth in a form your heirs are comfortable with

“Okay, Sanjana,” talk to you later, she said.

“That was a long call,” I said.

“Yes, my cousin Sanjana.”

“What were you guys talking about?”

“What else but real estate.”

“Interesting.”

“Yes, they know that I know you, V. Hence, the questions.”

“What was she asking?” I asked, ignoring her attempt to flatter me.

“Actually, she has a situation which she is unable to handle.”

“Which is?”

“Her father wants to divide his wealth among his three children.”

“Okay.”

“His thing is that he wants the division to happen when he is around, so, as to make sure that everything is settled amicably.”

“But why?” I asked. “Are Sanjana and her siblings not on good terms?”

“Nothing like that.”

“Then?”

“I think Sanjana’s father has seen way too many quarrels in the extended family and he doesn’t want the same thing to play out in his family, if and when he is not around.”

“Smart man. Money, can make people behave in funny ways.”

“Hmmm.”

“So what is it that Sanjana and you were talking about?” I asked.

“Here is the thing. Her father wants her to use her share of his wealth, to buy a house.”

“What is the problem with that?”

“He wants her to buy a house in their home town.”

“And Sanjana has a problem with that?”

“Not exactly.”

“Then?”

“Her point is, given that she is living in a different city, who will take care of the house.”

“Her father,” I said. “Isn’t that obvious?”

“He is in his 80s and Sanjana doesn’t want to burden him with this,” she replied.

“Makes sense.”

“And she doesn’t want the regular hassles that come with renting out a property.”

“Okay.”

“So, what do you think?” she asked.

“Why doesn’t her father simply transfer her part of the wealth in her name?”

“He has basic philosophical issues.”

“Like?”

“All his wealth is in the form of land and other commercial real estate.”

“Okay.”

“He believes that wealth should always be held in a tangible form.”

“Tangible form?”

“Meaning, something which can be seen and touched. Land, other forms of real estate, gold, diamond and other expensive stones, paintings, etc.”

“Okay.”

“And there is one thing more,” she said.

“What?”

“He thinks if he were to simply hand over money to his children they will spend it on frivolous things, instead of saving it and investing it.”

“Why doesn’t he trust his children?”

“Again, it comes from things he has seen in his extended family. Also, Sanjana in her younger days was a spendthrift and he had to clear her credit card bills more than a few times.”

“But I have met her,” I said. “She comes across as a very sensible woman to me.”

“Indeed, she is. Much has changed over the years, but her father simply doesn’t want to take the risk.”

“That’s rather silly,” I said. “If you can’t even trust your children, who do you trust?”

“Well.”

“Also, there is a problem with her father’s logic.”

“How?”

“Well, he thinks that by sharing his wealth in a tangible form, he will be ensure that his children don’t go out and spend money in a frivolous way. Now that doesn’t make any sense. Let’s say Sanjana agrees to his plan and buys a flat in her hometown. What stops her from selling that flat and using that money any way she deems fit.”

“Oh, yes,” she replied. “How come neither me nor Sanjana thought of this?”

“Well.”

“So, what should we do now?” she asked.

“Get me to talk to Sanjana’s father. And I will try convincing him on this. He needs to trust her and share his wealth in a form which she is comfortable with, if that means investing his wealth in financial instruments like fixed deposits, stocks, mutual funds, etc, then so be it.”

“Hmmm.”

“Also, it is important for him to understand that he can only control what is controllable. When he is not around, his children can spend the wealth more or less in any way they want to.”

“Now that’s not something I would tell him,” she replied.

The example is hypothetical.

(Vivek Kaul is the author of the Easy Money trilogy)