Passing Wealth to the Next Generation: Practical Tips with Mutual Funds

For High Net-Worth Individuals (HNIs), true wealth management goes beyond accumulating assets. It’s about creating a legacy—one that supports your family’s future with clarity, discipline, and long-term purpose.

Over the last few years, we've worked with several families who didn’t just want better returns. They wanted a structured, tax-efficient, and customized plan that would keep their wealth working even after them.

Here’s how mutual funds can be a core component of your legacy plan—and how to do it right.

1. Align Investments with the Personality of Each Heir

Every family member has a different financial temperament. Treating them all the same with one strategy may not be effective—or fair.

We worked with a family where the elder son is a business owner with an appetite for risk, while the younger daughter works in the civil services and prefers safety over volatility.

So we suggested:

• ₹1 Cr in equity mutual funds for the son to build long-term growth.

• ₹1 Cr split across Conservative Hybrid Funds, Gold Mutual Funds, and Debt-Oriented Funds for the daughter to ensure portfolio stability and regular income.

Outcome: Equal distribution of wealth, but customized for each person’s comfort and future needs.

2. Nomination Is Not Ownership A Will Is Still Essential

A common misconception is that nomination alone is enough. It’s not.

Nomination allows for smooth transfer, but it does not give legal ownership. Only a registered will does that.

One of our clients had about ₹3 Cr invested across various mutual funds. His nominee was his brother-in-law, intended only for emergency convenience. His actual intent was for his son and daughter to inherit the money. Unfortunately, he passed away without a will, which led to unnecessary legal complications.

Takeaway:

• Use both: nomination for ease, and a Will for clarity

• Review both periodically, especially after major life changes like marriage, birth, or inheritance

3. Gift Gradually with Systematic Transfer Plans (STPs)

STPs aren’t just for risk-managed investing—they're also an intelligent gifting tool when structured properly.

Example: A client wanted to pass on ₹50 lakhs to his daughter but also wanted her to learn the importance of investing gradually.

We suggested:

• Invest ₹50 lakhs in a liquid fund in her name

• Set up a monthly STP of ₹50,000 into Flexicap, Midcap, and Aggressive Hybrid funds for the next 100 Months

This helped her:

• Learn the behavior of different market cycles

• Avoid emotional investing mistakes

• Benefit from rupee-cost averaging

We call this mentoring through money.

4. Create a Multi-Generational Mutual Fund Strategy

Mutual funds aren't just tools for current income or short-term parking. When chosen wisely, they can help create lasting generational value.

Here’s how:

Choose funds that:

• Have long-term consistency in performance

• Are managed by trusted, well-governed AMCs

• Fit your family’s specific long-term goals (retirement, philanthropy, estate corpus, etc.)

Most importantly:

Work with a trusted Mutual Fund Distributor or a SEBI Registered Investment Advisor (RIA) who can help you:

• Understand suitability for each heir

• Structure nominations and taxation smartly

• Rebalance periodically to align with changing family needs

We suggested one client create an education corpus for his grandchildren. The plan included a SIP into selected equity funds, with an SWP (Systematic Withdrawal Plan) scheduled to begin 18 years later. His wealth will not only provide, but prepare his family for opportunities yet to come.

5. Bring the Family into the Conversation

A legacy plan becomes more powerful when it’s understood, not just written.

We encourage clients to:

• Conduct a family financial meeting once or twice a year

• Explain the intent behind investment choices

• Involve the financially mature family member to stay in touch with the advisor

This simple step builds financial awareness and prevents future conflicts. Your family won’t just inherit wealth—they’ll inherit wisdom.

In Conclusion: Wealth Transfer Deserves a Thoughtful Structure

You’ve spent decades building your wealth—now it’s time to ensure it moves to the next generation with purpose, clarity, and care.

Mutual funds, when used strategically, offer flexibility, tax efficiency, and adaptability across generations. But like every instrument, they must be designed around your family, not just your money.

If you're thinking about how to structure your family’s financial legacy, feel free to connect. I’d be glad to assist you in creating a plan that mirrors your values—and secures your family’s tomorrow.

Regards

Vishal Muralidharan.,CFP®

AMFI Registered MFD

GSM Investment Services ARN 174939

Disclaimer: Mutual Fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results. Returns mentioned are assumed, not guaranteed.