For hassle-free transfer of wealth from one generation to another, it is essential that individuals focus on estate planning.
Family fights over the division of assets are often the subject of movie plots and soap operas. Such disputes are an increasing occurrence in the real world too.
In the last two decades, individuals have accumulated a lot of wealth and hold a number of assets, but they do not devote equal attention to estate planning.
For hassle-free transfer of wealth from one generation to another, it is essential that individuals focus on estate planning.
What is estate planning?
Estate planning is concerned with the distribution of your assets according to your wishes or preferences after your passing.
Nominate
The first and most simple step most of us can take to make sure our wealth is passed on is to nominate beneficiaries for all of our financial assets.
While buying insurance it is mandatory to fill in the nominee's name. In mutual funds too, the application form allows for nomination and investors must use it.
Even if you have not mentioned a nominee at the time of investing, you can do so later.
Write a will
The easiest and simplest form of transferring wealth to intended beneficiaries is by writing a will. The will takes effect upon the death of the testator (the person who wrote it).
Any person over the age of 18 and in sound mind can draft his own will. It is not mandatory that it should be written by a lawyer.
A will can be written on plain white paper in any style. According to the Hindu Succession Act, there is no formal style for writing a will. The succession of property may differ based on the religion and customs of the testator.
An individual can also register the will. In Tamil Nadu, it costs less than Rs 1,000 to register a will with the Registrar office. Registration prevents tampering of the will as a copy is preserved with the registrar.
Conditions
What assets can you will?
All assets accumulated through your own earnings — property, jewellery, land, shares, deposits, cars and cash along with obligations and liabilities — can be passed on through a will. For inherited property, a Hindu can only distribute his share of assets to his legal heirs.
The person who is making a will should elaborately describe assets and identify them.
If it is immovable assets, it is better to mention the location and year of purchase. To avoid litigation in future, the testator should legibly affix his signature at the end of the document with date in the presence of the witness.
The will needs to be attested by two witnesses and it should be signed in the presence of the testator. If the will runs into pages, the testator needs to sign all the pages, whereas witness need sign only on the last page. The witness should know the contents of the will.
While writing a will, it should be remembered that a new will always supersedes an existing document.
Review
It is important for the testator to review the will periodically and particularly in the event of change in the family situation, such as birth, divorce, marriage and addition to the wealth.
Probate
A probate is official recognition of the original will. As per the Indian Succession Act 1925, in cities such as Chennai, Kolkata and Mumbai, it is mandatory to probate a will. In the case of financial assets, probate is necessary. However, finance companies and bankers say that in the case of deposits, proceeds may be paid to the nominee, he is legally responsible to assign benefits as per the will to beneficiaries.
Normally the nominee or the beneficiary applies to the court for grant of probate.
The time taken to complete the process may be anywhere between six months and three years.
On the demise of the investor, to effect the transmission of shares, units or other financial assets in favour of the nominee, the following documents will be required:
A letter from the nominee claimant to the Fund or Registrar requesting for transmission of units. A format of the letter is available at the Registrar and Mutual Fund web sites.
Death Certificate in original or a photocopy duly notarised or attested by a gazetted officer or a bank manager.
Bank account details of the new first unit holder i.e. the nominee along with attestation by the bank branch manager or a cancelled cheque bearing the account details and account holders name.
The procedure is much the same for shares held in the investor's name.
This is very useful and insightful article. I have been a regular reader
of The Hindu and have recently started with "The Business Line" and I am
pleasantly captivated by it. Kudos!
Thank Business Line for publishing very useful for all particularly senior citizens.It is hoped that your article will motivate many to write the will at the earliest.Regards to Business Line and the writer of the useful item.
B.K.Naidu