Estate planning
Life is unpredictable.
Estate planning in India can be done through Wills, Trusts & LLCs to avoid uncertainty & secure the future of legal heirs. Each method has its own benefits & requires careful planning to ensure that no dispute occurs.
Estate Planning is the process of preserving, managing and dispersing the assets of an individual in the event of their demise. It is now gaining momentum and is being considered by many individuals to preserve the family wealth, avoid family disputes and ease out the process after their death, especially since the onset of the pandemic.
An individual’s immovable assets like properties, movable assets like car, cash, jewelry, shares and stocks, insurance policies and others, debts, loans and even financial obligations become an important part of estate planning.
How to do Estate Planning?
Estate planning is a process carried out primarily using two ways:
By Writing a Will:
A Will is a legal document stating the intention of the testator (the person who is writing the will) to distribute his/her assets as per his/her desire after his/her death.
Any person above 18 years of age in India can write a Will. You can write your Will on plain paper it should be written in a simple, clear, and unambiguous language to avoid any confusion. The objective of the Will should be clearly stated.
To get the will registered, the testator along with the two witnesses should visit the local registrar / sub registrar’s office in a local court. He/she should submit the required documents along with the registration fees. After that a certified copy of the will would be issued and entry would be made in the registrar’s office regarding the same.
You can change your Will any number of times. All previous Wills would be invalid.
The video of the testator reading his Will himself may also be recorded. It will serve as additional proof of the validity of the contents of the Will.
Upon the death of the testator, the executor (the person appointed by the testator to execute his/her Will) will divide the assets between the beneficiaries as mentioned in the Will.
By Creating a Trust:
Now a day so many person writing a Will in a Trust mode.
In this, the assets are transferred by the person who creates the trust (settlor or the author), into a Trust that is managed by the trustees for the benefit of the beneficiaries. The document through which the trust is created is called a trust deed.
A trust created for the benefit of family or friends is called private trust and the trust created for the benefit of the general public is called public trust.
Creating trust will not only help in the management and distribution of assets but in the protection of assets too. Assets lying in the private or family trust cannot be held by creditors towards the settlement of the debts or loans, thereby safeguarding them from the claims.
Unlike in Will, there is no requirement of obtaining probate in a trust. So, it would also help in cost and time savings avoiding the hassles of visiting the courts.
Things to keep in mind before initiating Estate Planning
Following are some important considerations that one must keep in mind before initiating an estate:
- How much wealth do you own, in totality?
- Do you have excess capital? Are you comfortable giving this away in your lifetime?
- If you own a business, do you have an exit strategy or succession plan?
- How many heirs do you plan to provide your estate to?
- Do you have anyone trustworthy who can act as a trustee/executor of your estate?
Distribution of Estate after death, without Will
If a person dies without leaving behind a valid Will, it is said they have died ‘intestate’. Any property left behind, in that case, will need a Succession Certificate for distribution of that property:
- Succession certificate is the court order for distribution of assets of the deceased to the beneficiaries as per the Indian Succession Act.
- It is mandatory for transfer of title of the property from the deceased’s name into the name of the beneficiaries.
- Succession certificate gives privilege to the legal heir with right to recover debts or property.
Conclusion
Estate planning has taken added importance in the lives of families. However, it requires careful planning and consideration to ensure that no dispute or in-family fighting occurs after the estate creator’s death.
Apart from the standard Wills and Trusts method, LLCs have also come to assume center stage when it comes to estate planning. The revival of estate planning is welcome as it helps reduce litigation in family disputes.