Estate Planning

Estate planning is essential for all. It does not matter how much you own in your accounts or the number of valuables you have. Read this article to understand the importance of Estate Planning & different ways of doing so.

Estate Planning is the process of preserving, managing and dispersing the assets of an individual in the event of their demise. Estate Planning is one of the most important processes which was ignored since ages, however it is now gaining momentum and is being considered by many individuals to preserve the family wealth, avoid any distasteful experiences within the family and ease out the process after their death.

An individual’s immovable assets like properties, movable assets like car, cash, jewelry, Shares and Stocks, Insurance Policies etc, debts, loans and even the financial obligations become an important part of estate planning. Most estate plans are taken care of by attorneys who have experience in estate laws.
Broadly there can be following methods of Planning an Estate-

  1. Through a Will
  2. Through creation of Trust/ Corporate body or other structures.
  3. Distribution in one’s lifetime

Through a Will

According to Section 2(h) of The Indian Succession Act, 1925, a “Will” means the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death.

Hence, a WILL is a legal document which is prepared during the lifetime of the person (known as a Testator) but comes into existence after his demise. A WILL declares the testator’s wishes regarding distribution of his assets and possessions after his demise. A WILL should be made by the testator in sound disposing mind and without any coercion or undue influence from any person.

Although registration of a WILL is not mandatory under law, however getting a WILL registered increases its genuineness and authenticity as compared to a WILL which is unregistered. Once a WILL is registered, it is recorded in the register of the Sub Registrar and hence the chances of it being stolen, mutilated, or tampered are minimized. At any time, a certified copy of the Original WILL can also be obtained by the legal heirs of the Testator after his demise.

Appointing an Executor under the Will

A person writing a Will should be extremely cautious of the fact as to who will be the Executor of his Will- this being a position of trust and responsibility. An Executor is regarded as a representative of the testator, who takes charge of estate of the deceased and ensures that the assets are distributed as enumerated in the Will.

Through creation of Trust/ Corporate and other structures

A trust is a transfer of property by the owner to another for the benefit of a third person along with or without himself or a declaration by the owner, to hold the property not for himself and another. A trust is hence an arrangement between the Author of the trust and the trustees to transfer the legal ownership of assets to the trustee with an obligation that the same should be held for the benefit of the beneficiaries as specified in the trust deed. One of the major advantages of a Trust is that if the person goes bankrupt or faces other financial crisis, then the lender cannot touch the assets which are held within the Trust.

The subject matter of the trust is the property in respect of which the trust has been created. For creating a valid trust, the subject matter should be defined with certainty and such property should be capable of disposition.

For the purpose of estate planning, a Private Trust can be created, i.e when the purpose of the trust is to benefit an individual or a group of individuals or his or their descendants for any legal person and who is capable of holding property, it is a private trust.

Forming a Limited Liability Company (LLC)

One of the emerging modes of estate planning is forming a limited liability company (LLC). LLC can be a useful legal structure as the assets will be under your control during the lifetime and at the same time it can be passed down to your loved ones while avoiding or minimizing estate and gift taxes. A family LLC allows your heirs to become shareholders who can then benefit from the assets held by the LLC, while you retain management control.

Unlike a corporation, the members of an LLC can manage it in whatever form they like and are subject to lesser compliance, regulations and formalities than a corporation. Same as partnership, the members of an LLC file the business's profits and losses on their personal tax returns, instead of the LLC itself being taxed as a business entity. Further, the LLC can be for “profit” or “not for profit” as well.

Distribution of Assets during the lifetime/Gifts

According to Section 122 of The Transfer of Property Act 1882, a “Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.

A lifetime gift is a gratuitous transfer of ownership of any property between living persons which is not made in expectation of death. On the contrary, gifts made in expectation of death may qualify as deathbed gifts.

For a lifetime gift to be valid, it is not mandatory for the legal ownership to be transferred to the recipient. A donor may make a valid gift of the beneficial ownership of the asset while retaining the legal title. The mark of distinction between a gift and any another type of transfer is the “consideration”. A valid gift is “without any consideration”.

A lifetime gift may be made by:
  • A gift deed or other instrument in writing.
  • Through delivery in cases where the subject of the gift is capable of delivery
  • Through creation of trust.
There will be no valid gift if the donor or the done are not competent to give or receive the same.

Distribution of Estate after death of a person

If there is a Will in existence

How can the family take care of the process if a person dies leaving behind a Will?

An Executor is a person who is given the responsibility either by the Testator under the Will or appointed by the Court, to dispose off the assets of the deceased as enumerated in the Will. An Executor may act as mediator among family members of the deceased testator and ensure a smooth, peaceful and proper disposition of the estate, and also discharge responsibilities of maintaining proper accounts of estate, debts and discharge of liabilities, if any. If under any circumstance, the Executor declines or is unable to perform his obligations, then the court of competent jurisdiction may, on an application made by a beneficiary or legal heir, appoint an Administrator to oversee disposal of the estate.

Legal Process

If there is a Will in existence, the executor appointed under the Will, must get the same validated through the court of competent jurisdiction. The genuineness of a will is determined and validated through a legal process known as “Probate Of Will”. A Probate becomes mandatory under the Indian Succession Act, 1925, when a Will is made in the jurisdiction of the regime of the Lieutenant-Governor of Bengal or within the jurisdiction of the Ordinary Original Civil Jurisdiction of the High Courts of Judicature at Madras and Bombay. Probate of Will is understood as the legal process that a Will undergoes to prove its validity before any assets can be apportioned to the legatees or recipients. Whether the Will is registered or not the executor as appointed in the Will has to initiate the process of obtaining probate in the District Court or High Court of appropriate jurisdiction. With the grant of Probate, the rights with respect to the administration of the estate is granted to the applicant who is the executor as appointed by the testator under the Will. A beneficiary in the Will can also be appointed as the executor of the Will.

In case of no Will or other forms of estate

When a person dies without any estate planning or without executing a Will, his/her assets are then distributed according to the Inheritance laws. For example, if we consider a Hindu dying intestate, the provisions of Hindu Succession Act shall be applicable, wherein the rules governing the distribution of the assets in case of intestate death of a female are different as compared to the intestate death of a male. The assets are distributed to Class-1 legal heirs in equal proportions:
Class 1 Legal Heirs of a Hindu Male Class 1 Legal Heirs of a Hindu Female
Widow Son
Son Daughter
Daughter Husband
Mother -
In case class 1 legal heirs of the deceased are predeceased, then the estate is distributed among the class 2 legal heirs in accordance with the provisions of the Hindu Succession Act.

How can the family take care of the process if a person dies intestate?

To establish that a person is a Legal Heir of the deceased, Legal Heir Certificate is obtained from the concerned authorities. A Legal Heir Certificate also known as Surviving Member Certificate is issued to prove the right legal heirs left behind by the deceased person. This Certificate is generally required as proof of surviving member to avail different benefits from the different places and in the Government Services where surviving member are preferred. The legal heir certificate consists of details like name, age, relationship with the deceased and photograph of all surviving family members.

Legal Process

  • Drafting of Family Settlement Deed - A family settlement deed is an agreement, (preferably written) between members of the same family regarding the distribution of properties and assets of the deceased, intended to be generally and reasonably for the benefit of the family members. A family settlement deed can be drafted mutually as per amicable decision regarding ownership of shares of each legal heir of the deceased.
  • Suit for partition - In case all the legal heirs of the deceased are not giving their consent for partition of the property, then in such a case, a partition suit is required to be filed before the appropriate court of law. The surviving heirs of the property can then get the partition done by metes and bound. The partition can be in an agreed ratio or as per the law of inheritance applicable.

To conclude, estate planning is hence, an ongoing process and should be commenced as soon as an individual has any assessable or computable asset base. As life progresses and goals shift, the estate plan should be amended in accordance with them. It is always suggested to take a professional’s help who will understand the nitty- gritties, make appropriate suggestions, and create a tailored Estate Plan as per your needs and wants. A professional will take care of contingencies involved, thereby leaving no room for any ambiguity or gaps.

We would be happy to assist you!

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