Inheritance of wealth is one of the most critical aspects of estate planning. It is equally important like wealth creation that shouldn’t be overlooked.
Benefits of estate planning:
1. It is the legal arrangement for distribution or transfer of one's assets to whom so ever he wants to distribute.
2. Helps to protect or preserve assets during his life and when he is not around.
3. it avoids possible disputes among the beneficiaries, family members, minors, etc.
4. Makes sure that the financial and philanthropic goals are met even when he is not alive.
A common misinterpretation is, it is needed for the rich only and not for others, that is not true. Its importance is the same for anyone, who has assets. Nevertheless, of the amount of wealth is generated, it is essential to make an estate plan to distribute the riches as per his wish but not as per the succession laws. Estate is the net worth of an individual, a difference between a person’s assets and liabilities, it doesn’t matter how much is the size or value of it.
An estate plan; is not just making a “Will and is not only related to the property. But details of all assets like bank accounts, business, cash, investments, jewelry, property, etc. that are owned by him are to be included during estate planning.
Modes of Estate Planning:
1. Estate Planning by making a will:
The standard way of estate planning in India is making a Will. As per The Indian Succession Act, 1925, a Will is defined as a legal declaration of the testator's intentions, concerned to his property, which he desires to be carried out into effect after his death. An individual's wish will be mentioned and specified how he wanted his estate to distribute among the beneficiaries (whose names will be mentioned in the Will) after his demise. It comes into force after the death of the creator (testator).
Any individual who is more than 18 years of age and is of sound mind can make a Will. Registration of a Will is non-compulsory; however, it is always preferable to register it. The validity of the Will does not get affected by the registration. But it has to be certified by two or more eyewitnesses, who should have seen the testator signing on the Will. As per the Indian Succession Act, if a Will is registered or not, it must be proved that it is valid and it has to be executed duly.
A Will becomes 'Void' and becomes non-enforceable in the following circumstances:
1. A person making a Will who cannot contract-if he is below age 18 or unsound mind.
2. If coercion, force, or undue influence is used to obtain a Will.
3. if a Will is made under the influence of any intoxication or in such a mental state.
A Will can be challenged on countless grounds. So the creation of Trust is the most preferred way of estate planning than writing a Will.
2. Estate Planning by forming a Trust:
The formation of a private trust is an ideal and easy legal way of estate planning. A person with more than 18 years of age and with a sound mind can enter into a legal contract to create Trust, in which estate/property is managed by one or more persons (trustees) for inheritors’ sake. The critical purpose of estate planning is to take care of the enjoyment of the spouse, children, and the interests of charity or philanthropy of a person.
Benefits of creating a Trust:
1. A trust is a bankruptcy-proof structure. Assets that are put into Trust remain safe in case of any business losses.
2. The Creator of the Trust can make himself one of the receivers and enjoy comfort when he is alive. But a Will comes into existence after the death of the creator of it.
3. A trust does not require probate so that a person can avoid family disputes.
4. By making a charitable Trust, provision for charitable/philanthropic purposes can be made.
5. Activities of the trustee can be conducted and supervised by appointing an administrator/protector of the Trust.
6. The trustee is accountable for performing his duties and managing the trust properties based on the powers and duties assigned to him under the trust deed.
7. Trustees will act as guardians for the beneficiaries that suits much to safeguard minor children's interest in the Trust.
8. Trust is superior to Will as the individual can control assets even after transferring them to Trust.
Estate planning by making a Will or forming a Trust; depends on the individual's choice, but a person should make any one of it to avoid family disputes and save the interests of his spouse and child/children. It is advisable to take the help of a legal consultant for all aspects of writing a Will or formation of a Trust.
By Team Wealth ATM
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