Legacy and Estate planning in simple terms refers to the passing assets/investments down from one generation to another. An estate plan is a process of planning for the orderly administration and disposition of property after the owner dies.
Legacy and Estate Planning
Estate planning involves making plans for the transfer of your estate after death. The property in one’s estate may consist of Financial Assets (e.g., Bank accounts, Shares & Stocks, Bonds, ETF, Life Insurance Policies or Business Interests), Tangible Personal Assets (e.g., Artwork, Collectibles, or Vehicles), Immovable property (e.g., Land, Residential real estate, Commercial Building), Tangible Commodity (e.g., Jewellery, Gold, Silver, etc.) and Intellectual property (e.g., Royalties) and so on.
Estate planning in India includes making a will, setting up a trust or making a nomination and even life insurance.
Objectives and Goals
- Make sure most of the estate is transferred to your beneficiaries
- Paying the least amount of taxes on your estate
- Assigning guardians for minor children, if any
- Helping to reduce or avoid conflict among family members.
- Ensuring that his/her children have the legal guardian of their choice.
Why Necessary?
In the absence of a Will, the distribution of the estate is governed as per the Laws of the country/ nation. If you are a Hindu, it is as per Hindu Succession Act 1956. For Christians, Jews and Parsis, it is as per the Indian Succession act 1925. If you are a Muslim, your property will be divided according to Muslim Personal Law.
This means that your loved ones might be left out of the disposition of the property, and in the worst situation when there is nobody to claim it, the Government becomes the owner of the property. Therefore estate planning is very much required as this is ultimately planning for your own assets with the future perspective in mind.
Methods of Estate Planning:
Estate planning includes making a will, setting up a trust, making a nomination and even whole Life Insurance.
In a will you state how you would like to distribute your assets (land, property, gold, cars) after death. Who should get how much? This is basically what a will is all about.
You need an executor (someone you trust) to execute the will on your behalf (Make sure that your wish is honoured as you are not around to do the job yourself).
A trust is used to transfer wealth to your heirs (children).These trusts have to be compulsorily created/registered and Governed under the Indian Trusts Act 1882. You can transfer shares/mutual funds, fixed deposits, cars, land, apartments/house, gold, art as well as antiques to the trust.
In a trust you (Settlor) can transfer your movable property such as a car as well as immovable property such as property or land to the trustee (person who holds the property on behalf of your beneficiary/children).
The Trustee is the Executor (Manager of the Assets) on behalf of your Beneficiary and ensures that your wealth reaches the beneficiary irrespective of what happens to you.
If you have a Fixed Deposit, Shares or Mutual Funds, you need to make a nomination, where you state who will get the money lying in these accounts on your death. The person you appoint is the Nominee.
The Nominee (basically someone you trust) transfers your wealth/investments to your heirs (Children).The nominee is not the owner/inheritor of your wealth. He is a protector/trustee of your wealth and makes sure your beneficiaries (heirs) receive the money. Nomination is done mainly for shares/mutual funds, life insurance policies or land and property.
When you die after making a will, your beneficiaries/heirs inherit your property/wealth. The nominee you appoint (could be your nephew or a lawyer), serves as a Trustee and makes sure your wealth reaches your heir. A Nominee is not permanent and you can change your nominees any number of times. You can appoint your heirs (children) as Nominee. If your child is a minor and you appoint him as a Nominee; you need to appoint an Assignee who serves as a Guardian.
If you want to leave a huge legacy for your children and Loved ones, you can take up a whole life insurance policy. On policyholder’s death, the nominee (beneficiary) gets the sum assured as well as the accrued bonus. The amount is Tax Free in the hands of the Beneficiary.
