Estate Planning

What is estate planning?

An estate plan is the process of planning for the orderly administration and disposition of property after the owner dies.

Estate planning involves making plans for the transfer of your estate after death. Your estate is all the property that you own. It can include cash, clothes, jewelry, cars, houses, land, retirement, savings accounts and so on.

Estate planning India includes making a will, setting up a trust or making a nomination and even life insurance. Estate planning services in India have gone to a new level Video taping of wills, making of trusts and even a probate (Will certified in a court) is the new way.

Why is estate planning necessary?

In the absence of a will, the distribution of the estate is governed as per laws of the nation. If you are a Hindu it is as per Hindu Succession Act 1956. For Christians, Jews and Parsis it is as per the Indian Succession act 1925. If you are a Muslim your property will be divided according to Muslim Personal Law.

This means that your loved ones might be left out of the disposition of the property, and in the worst situation when there is nobody to claim it, the Government becomes the owner of the property. Therefore estate planning is very much required as this is ultimately planning for your own assets with the future perspective in mind.

  1. Pass on your wealth: You are able to pass on your wealth and assets to your loved ones and heirs, in a hassle free manner. This helps to avoid family disputes and fights.
  2. Care for your loved ones: If you have a handicapped child, you can provide money for future needs. A guardian would require money, as this child has special needs.
  3. No Court Battles: You have the family settlement where property and assets are divided in an amiable manner. A probate might prevent those lengthy court battles.
  4. Digital Settlement: In the digital age the benefits of e-insurance and demat accounts are passed to your heirs. Video taping of a will ushers a new era in estate planning.

What are the methods of estate planning?

Will: In a will you state how you would like to distribute your assets (land, property, gold, cars) after death. Who should get how much? This is basically what a will is all about.

  • You need an executor (someone you trust) to execute the will on your behalf (Make sure that your wish is honored as you are not around to do the job yourself).

Trust: A trust is used to transfer wealth to your heirs (children).These trusts have to be compulsorily created/registered and Governed under the Indian Trusts Act 1882.

  • In a trust you (Settlor) can transfer your movable property such as a car as well as immovable property such as property or land to the trustee (person who holds the property on behalf of your beneficiary/children).
  • The trustee is the executor (manager of the assets) on behalf of your beneficiary and ensures that your wealth reaches the beneficiary irrespective of what happens to you.
  • You can transfer shares/mutual funds, fixed deposits, cars, land, apartments/house, gold, art as well as antiques to the trust.

Nomination: If you have a fixed deposit, shares or mutual funds you need to make a nomination, where you state who will get the money lying in these accounts on your death. The person you appoint is the nominee. The nominee (basically someone you trust) transfers your wealth/investments to your heirs (Children).The nominee is not the owner/inheritor of your wealth. He is a protector/trustee of your wealth and makes sure your beneficiaries (heirs) receive the money. Nomination is done mainly for shares/mutual funds, life insurance policies or land and property.

  • When you die after making a will your beneficiaries/heirs inherit your property/wealth. The nominee you appoint (could be your nephew or a lawyer), serves as a trustee and makes sure your wealth reaches your heir. A nominee is not permanent and you can change your nominees any number of times. You can appoint your heirs (children) as nominees. If your child is a minor and you appoint him as a nominee you need to appoint an assignee who serves as a guardian.

Whole Life insurance: If you want to leave a huge legacy for a disabled child you must take up a whole life insurance policy where on the policyholder's death, the disabled child (beneficiary) gets the sum assured as well as the accrued bonus.

  • If you have a genetic disorder which has a high chance of being passed on to your child then you can opt for a whole life policy where death benefits and an accrued bonus mean a large sum at maturity.