Each one of us is working really hard to achieve our goals, those goals include everything based on where we stand currently. For someone who is doing fairly well when it comes to meeting their everyday needs, the focus becomes Creating ‘Wealth’. Now, Wealth has always been something that people have been proud of both inheriting and passing forward. Wealth is one of those privileges many people are born with while others create it in their lifetime for the generations to come.
Estate Planning: All that you need to know On this note, we must also care to worry about the problems in passing on the fortune to the next generation? Nobody certainly wants to lose their fortune because of their complacency. In these unpredictable times one must be ready with whatever is to come and Estate planning is also a very important task that you must perform if you do not want your near and dear ones to struggle to claim what is already theirs. Not to sound negative, but there can be an unexpected demise or casualty and in such a case your family going through a lot of trouble to claim their own assets and money is the last thing you want for them.
Estate planning is very crucial, not just for those who own a huge fortune but for everyone. Most people have a plan to this in the back of their mind but never really take the action and their families suffer because of that. We need to understand that it is not a pessimistic step, in fact it is a great step to ensure our families’ happiness, it need not be delayed till your retirement. Estate planning is one big step in planning for the future contingencies.
An estate constitutes all the property owned or controlled by the person. It may consist of financial assets (e.g., bank accounts, stocks, bonds, or business interests), tangible personal assets (e.g., artwork, collectibles, or vehicles), immovable property (e.g., residential real estate, tea/timber rights), and intellectual property (e.g., royalties). Estate planning is becoming popular these days in India mainly because of awareness. Some of the reasons behind low growth rate of Estate planning so far are Nuclear families, procrastination or lack of perceived need for the same.
Estate Planning via Will
A larger population who go for estate planning decides preparing a will straight away without even taking other options into account. A will is a unilateral legal declaration wherein the testator (creator of the will) declares his/her intention concerning his/her assets. This comes into action only after the death of the creator of the will and bringing any change to the will gets very difficult when the testator is physically or mentally unwell. There have been cases of rivalry between the beneficiaries a lot of times which could have been avoided if the testator had opted for a Trust.
Estate Planning via Trust
A Trust can be private or public and also minimizes estate tax during transfer. Separation of Assets also gets easy in this case. Trust also saves our assets from lenders in case of bankruptcy or insolvency and the transfer of the wealth is comparatively quicker as compared to the Will. Will become a public affair as it is court controlled whereas Trust remains a private affair as it is controlled by the family. One drawback of the Trust is that the trustee may take undue advantage of its powers especially if the beneficiaries are under-aged.
The best would be to use a combination of both Will and Trust.
When death occurs without a will then the rule of forced heirship (a legal concept) applies in which an individual is not able to decide who will inherit the estate on his death. A country’s legal system can limit the freedom of a testator to dispose of assets as he or she finds appropriate. Forced heirship rules are different for different religions. Hindus are required to follow the Hindu succession act, whereas Muslims have to follow Islamic law, Christians to Christian law and Parsis to Parsi law. In India, all Wills are governed by the Indian Succession Act, 1925 which do not automatically fall under their personal Law of succession. A registered will is a testamentary document and the succession shall be in accordance with the content mentioned in the will for all the property/assets mentioned in the will and the part of estate not mentioned in the Will will be governed by personal Law of succession. The remaining properties not covered by the will shall be governed by the personal law of succession. For example, in the case of a deceased Hindu, Hindu Succession Act will be applicable whereas those deceased not covered by any personal succession law shall be governed by the Indian Succession Act 1925 (Section 4).
Not everyone has the knowledge of these laws and your family may have to suffer any loss because of this. So, It is in best of our interest to do Estate Planning at the earliest.
In the coming years, we will see a rise in the companies providing services of estate planning in our Country. Wealth preservation is an art, not everyone can take care of the fortune they inherit. In the case of an Unplanned and unstructured estate planning, there may be huge wealth destruction, leading to several other issues.