In The Signal Brief's Tuesday special, I sit down with an expert from across industries.

Our focus remains the same: helping you understand the trends shaping India. We're simply bringing you more of the conversations behind those stories.

Today's guest is Kanchi Gandhi. She's the managing director at Kotak Mahindra Trusteeship Services Limited, where she helps HNI and UHNI clients with estate and succession planning.

We spoke about gray divorces, meaning couples over 50 who are splitting up, what that looks like, and how both parties divide assets.

The Core produces The Signal Brief. Follow us wherever you get your favourite podcasts.

NOTE: A machine transcribed this episode. A human has looked at this text but there might still be errors. Please refer to the audio above, if you need to clarify something. If you want to give us feedback, please write to us at feedback@thecore.in.

TRANSCRIPT:

Kudrat (Host): Hi, I'm Kudrat Wadhwa, and you're listening to the Tuesday special interview on The Signal Brief.

Today's guest is Kanchi Gandhi. She's the managing director at Kotak Mahindra Trusteeship Services Limited, where she helps HNI and UHNI clients with estate and succession planning.

We spoke about gray divorces, meaning couples over 50 who are splitting up, what that looks like, and how both parties divide assets.

I began by asking her if she has seen a rise in gray divorces in the recent past.

Kanchi: So in my work, yes, we have had situations where gray divorces are becoming more common. So what exactly is a gray divorce? A gray divorce, which is also known as silver splitting, is where couples get separated after being in a meaningful relationship, being married for maybe a few decades.

So once they are 50 years and above, that is generally what the term is used for. The term is used for those sort of divorces where couples who are more than 50 years old and have been married for a long period of time, perhaps decades, are choosing to get separated or get divorced.

If you look at statistics for gray divorce across the world, these numbers have been rising.

In India, we don't really have concrete statistics where these sort of things are measured, especially divorces, because in India, marriages are considered a commitment for life, right? So it's not something that we have a lot of statistics on. But outside, if you see, statistics are freely available, and you will see that in the US, UK, and Europe, the rates of gray divorces have been rising at a continuous rate over a period of time.

Divorce rates for people over 50 years have doubled in the US. For people over 65 years, they have tripled over a period of time. A significant percentage of all divorces are now gray divorces of ages 50 years and over. So this is a situation which has been increasing over time. We will continue to see more of these across the world and also in India.

So when we speak to legal experts, etc., we also see in India that these rates are rising, especially in urban India. Over the past decade or so, you will notice that the divorce rates for gray divorces have also been rising in India.

Kudrat (Host): So, I was just going to ask, taking that into account, what are the main financial challenges that come up when a situation like this occurs?

Kanchi: Yeah. So when you're looking at a divorce which happens after a certain number of years of being together, there are a lot of things that need to be taken into consideration because it's not a simple situation.

After you have shared a life for so many decades, it's not only your life, but it's also your financial life, right? So a lot of your assets will be interlinked. Your finances will be interlinked. Your business holdings, real estate, legacy assets, all of that will be interlinked. Your holdings may not be separate.

There will be informal family arrangements in place, discussions, commitments, and understandings between family members. When a divorce happens at a certain age, all this needs to be relooked at. What was working for a period of time needs to be reconsidered, and changes need to be made to look at the new reality.

So a lot will change, not only in your financial holdings, but also going forward in terms of how things will play out as you go ahead.

Some of the things that one needs to consider simply from a financial perspective, I mean, we're not going into the whole emotional aspect of it and other things which definitely need to be considered.

But simply if you look at it from a wealth perspective, a few things need to be looked at.

One is that you have to minimize disruption. So you may have certain core assets, maybe your home or your family business or a bulk of financial investments. So that needs to be looked at and planned for.

How do you reallocate the economic benefits so that both partners retain some sort of stability, right? There should not be any unnecessary tax implications or forced selling of assets, etc. But we want both partners to maintain a certain amount of liquidity to take care of their lifestyle needs and their protection over time.

So that is important. How do you minimize disruptions and ensure that there is a structured segregation of assets?

Second is, how do you move from wealth creation to wealth protection? Because when you are together, you're not so worried about any of these aspects except how do you keep growing your wealth, how do you take care of each other and your family over a period of time.

Now you have to change your priority. You go from growth to preservation to continuity, and you want to ensure that your long-term income security and long-term needs are not impacted in case of any divorce that happens, especially when you're depending on shared assets for any sort of cash flow as you go along.

These are two things which I think families must consider, and these are also soft aspects, right?

I mean, money, if you can't divide it 50/50, that's a little difficult to do, especially when assets are different and needs are different, and maybe what each person wishes to get from the divorce is also different.

So these are very, very sensitive aspects that need to be considered. These are long-term decisions, so they carry the burden of legacy, identity, and even fairness.

Structuring has to be done very thoughtfully. You've got to make sure that you're reducing the friction and that you have the right people advising you on these matters.

Otherwise, it's not a pure economic decision, and you've got to understand that it carries a long-term impact and there's a history which you're taking ahead as well.

So getting the right advisors to help in this decision-making becomes extremely, extremely important.

Just to bring in the idea of what happens when you're getting divorced at such an older age of over 50 or over 60, you've got to look at it as some sort of a starting over, a do-over, right?

So what happens at that point? You have to relook at your cash flows. Where is the money coming from for your day-to-day maintenance and your regular requirements? There have to be independent income streams for each of them. Now it's no longer a shared asset, so the separation of income streams and cash flow becomes extremely important.

At that age, you also have to take care of longevity planning and healthcare planning, right? Because as age advances, healthcare costs will also advance. There will be long-term medical needs. There might be dependency or assisted care that might be needed over a period of time.

So that has to be plugged into all considerations.

Thirdly, you've got to also look at it from a legacy and a liquidity perspective. So what happens to these assets over a period of time? You may use them during your lifetime, but how do you plan for the multi-generational succession and legacy planning for these assets?

Financial planning from these perspectives is also important.

But we also have to look at it as, if you're going to be starting over, it is a do-over, then what is your second chapter going to look like? What are your lifestyle goals? What is going to give you purpose? Do you want to start something new? Do you want to do philanthropy? Do you want to go in some other direction?

In that case, what are those financial needs? Those need to be planned for separately as well because, without that purpose, the emotional issues that come up with that will then have to be dealt with.

So it is not only sustenance and medical care that are required, but also what gives you purpose after this, and how much money is needed to sustain that or to give enough protection for that as well.

Kudrat (Host): So you said you've seen some cases of gray divorces in your work. I was wondering, what have you noticed in terms of the difference between women versus men who are undergoing this process?

Kanchi: I don't want to draw any general conclusions, but in the few situations that we have seen, what I think is most important is to ensure that the woman in the relationship is taken care of financially.

Because in a lot of cases, especially when a traditional setup is followed, women are not financially independent. They are not able to take care of some of these aspects on their own. So it's important that they are taken care of, at least financially. I mean, the rest of it is a different thing altogether.

But sometimes women get the shorter end of the stick, and they're not aware of what they should be asking for. So getting the right assistance, protecting the financial interests of the woman, and making sure that she doesn't have to be in a situation where she's worrying about the future over a period of time are all important.

And all of those things that we talk about, whether it's healthcare, whether it's the pursuit of something different, whether it is regular maintenance, etc., all of that is taken into account and a plan is made for what is to be given to her.

Because usually, in most situations, you will have a traditional setup in place where women are dependent on the male family members for their financial sustenance, for cash flow, for planning, and even for knowledge of what is happening. They're not always a part of the decision-making process when it comes to the management of assets.

When you're in a thriving relationship, it doesn't matter because you are taken care of. But in such situations, it's important that the woman is taken care of in a specific manner. That is the responsibility of, I would want to say, the family as a unit. That's your responsibility, right? To make sure that you're being fair to both parties. Usually, it is the woman who gets the unfair deal. So it's important to take care of that as well.

What we have generally seen is that when we work with some of these larger families and such situations come up, because there is such a long history and a feeling of making sure that the spouse is taken care of, things tend to be handled thoughtfully.

Acrimonious divorces are a completely different story. But in situations where both members are doing it mutually, there is a bit of fairness that comes in.

The settlement that they reach, there's a bit of back and forth, there's a lot of hemming and hawing, and there's an up and down in terms of valuations and what has to be given. But generally, we've seen that the settlement that is reached is fairly even, and it takes into account the requirements of both parties.

I would also say that we have seen a lot of these situations, but most of them are very recent. It is really over the last five years or so that these situations have been rising.

It's not only that the divorces are rising, but also when we are having conversations with families, there is a sense of, "You never know what can happen. We have to prepare for a situation where something like this could happen."

Whereas when I used to do this 10 or 15 years ago, the conversation was always, "Divorce is not something that I want to plan for. It is not something that happens in my family. We are a close-knit family. Let's not get into such awkward conversations."

But now, even for older couples, the discussion is fairly open. Both parties are open to the idea that there is an option, this might happen, and we should plan for a worst-case scenario or for what will happen if this does happen.

That is a big change from the conversations that used to happen a long time ago.

So it's not only the actual situation, but also the conversation around divorces, and gray divorces in particular, that is becoming more open.

There are many factors also for this, Kudrat. As women become more independent, as you grow older, sometimes you grow apart.

Sometimes, when children are no longer at home, they've gone off to college, gotten married, or are living separately, there is this very Western concept of the empty nest, which has also come into India, right?

It's not all families that are now living as joint families. Nuclear families are becoming more common. Then, when the children are no longer there, the empty nest syndrome sets in, and it's just you and your spouse. That can lead to issues as well.

So there are many factors contributing to this rise in gray divorces.

Not the least of all is that society is changing. These are more acceptable now. Many years ago, it was difficult for a divorcee to be integrated back into society. There was a lot of ostracising that would happen.

Nowadays, that's not the case. It's very common for divorces to happen.

So these situations are only going to rise as we go along in all age groups, whether it's very young divorces or gray divorces as well.

Kudrat (Host): And you had mentioned legacy planning as well. So can you talk more about what are some issues that can come up with inheritance and legacy planning when a gray divorce happens? And what are some suggestions that you give to your clients?

Kanchi: Yes. So what we always do, regardless of any situation, is say that it's important to do your estate planning. You need to have an estate plan in place, which could generally consist of a will and a trust, where there is clarity on the movement of assets over a period of time.

Succession planning as an exercise is important. It becomes even more important in situations where there are blended families, late-life separations, or different family dynamics that come into play.

In such situations, it becomes even more important that you have a will in place.

Now you have segregated assets and independent assets. What is going to whom? How do you ensure that it goes in a certain manner? That it's going to the children at the right time, it's going to the spouse to take care of her needs or his needs, and then to the children.

A will very often may not be enough. You may want to look at something slightly more sophisticated, and that's where a trust comes into play.

Having trust structures that are created in a certain manner to give certainty of bequest to family members and to ensure that the succession plan is set out in a particular way becomes important.

So we do speak to families about making sure that trusts are in place to take care of these situations.

We also say that you must keep relooking at some of these things, especially in situations like this.

You may have a will or a trust in place, but when some of these things happen, you must relook at it because what is old will not work anymore.

You have to revisit it, and that is something, Kudrat, that I have seen families do.

In situations where there is a divorce, especially, we have seen that families come to us and say, "Now this is the situation. Divorce has happened. Now I want to relook at my plan. So let's redo the will. Let's relook at the trust, or let's make the trust," for example.

Succession planning is important, and that is something that we have seen families looking at a little more seriously and also executing fairly quickly.

Having these structures in place, putting them in place quickly, reviewing them over a period of time, and making sure they're still relevant, all of that becomes important.

Also, looking at intergenerational wealth, right?

You may have financial assets which are easy to plan for, but also your business holdings. How do you ensure that your business holdings move in a particular manner, that control moves in a particular manner, that the right to dividends and the right to money if a business is sold all move the way you want?

Trusts become important.

So these are things that we do see families giving due importance to, especially in a divorce situation.

I'll give you an example.

We worked with one family where there was a divorce. They were about 60 or 62 years old, and they had two children, both of whom were in the business.

Because of the divorce, the shareholding also needed to move in a particular manner, so they did make trusts.

Certain assets were gifted, and assets were put in a trust in a particular manner, where control moved in a particular way so that, after the spouse, it would go to the sons, and they would have control over and access to the shareholding in the family entities as well.

That way, there was a plan that ensured that both spouses were taken care of in a specific manner, and the money would move to the children.

There was no right for the spouses to go and sell or pledge that asset without a certain amount of controls in place.

So it gives protection not only for the spouses but also for the next generation, and maybe beyond as well.

Kudrat (Host): Okay, understood. So that's mostly what I wanted to ask. I think we touched on pretty much everything. Is there anything else that you'd like to add?

Kanchi: I would just want to say that we've seen a lot of global examples of some of these cases which were well-documented, high-profile cases, etc. And you've seen that if you don't have a plan in place, things can go wrong in many situations as well.

So as these situations are increasing, awareness is also increasing. Hopefully, the taboo around succession planning will not be as big an issue as it was in the past, especially in divorce situations, because it's most important to have these structures in place, especially when things are going wrong.

When there is a divorce, or when you feel like that is likely to happen in the future, therapy, counselling, and taking care of yourself are all important. But taking care of your financial health is just as important because that is one of the most important things that will give you comfort as you go along.

So if you have that in place, that takes care of, I would want to say, 75 to 80% of the issue. The fact that you are financially taken care of, that your financial security is guaranteed through some of these structures and through definitive, structured planning, solves about 75 to 80% of the issues that may come up in the future.

So it's important to give this due importance and make sure that the planning is done in advance.

Kudrat (Host): Great. Thank you so much, Kanchi. Appreciate it.

Kanchi: Thanks for taking out the time to speak with me. Thank you.

Kudrat (Host): That's all for today. You just heard The Signal Brief. We don't do hot takes. Instead, we bring you deep dives into the how and why of consumer trends.

The Core produces The Signal Brief. Follow us wherever you get your favourite podcasts.

To check out the rest of our work, go to www.thecore.in.

If you have feedback, we'd love to hear from you. Write to us at feedback@thecore.in, or you can write to me personally at kudrat@thecore.in.

Thank you for listening.