Estate planning is the process of organizing the distribution of your assets and taking steps to safeguard them after your death. This includes providing for your loved ones and making sure your wishes are fulfilled. It may seem intimidating, but estate planning is a crucial aspect of financial planning that can give you and your loved ones peace of mind and security.

I. What is an estate?

An estate is everything comprising the net worth of an individual. These can include moveable and immoveable assets, physical and intangible assets that the individual owns or has a controlling interest in.

In this article, property or assets are used interchangeably with respect to estate planning.

II. What is estate planning?

According to Investopedia “Estate planning refers to the management of how assets will be distributed to the beneficiaries after an individual’s death”. One of the first thigs to do would be to assess your

III. What are the key terms in estate planning?

Will: A legal document created to provide instructions on how an individual’s assets/property should be handled after death. It can be handwritten or typed and can be registered though its registration is not mandatory.

Testator: Person making the will.

Intestate: A person has died intestate if they have left no valid will in respect of their property.

Beneficiary: A person who receives assets through inheritance is called a beneficiary.

Executor: The person appointed by the maker of the will to execute their last will and testament after the death of the testator.

Probate: The copy of a will certified under the seal of a court with competent jurisdiction.

Probate is mandatory for wills made in the jurisdiction of Kolkata, Mumbai and Chennai or if the immoveable property included in the will is located in that jurisdiction.

Who can make a will?

A valid will requires that the maker of the will should be above 21 years of age, be of sound mind and that they are acting in their own free capacity without fraud or coercion.

A will can be changed by its maker as many times as they wish i.e., it can be revoked by the testator before their death.

IV. What happens if there’s no valid will?

Depending on the religion of the individual owning the estate, the relevant succession law will apply at the time of their death.

Hindu Succession Act, 1956: This act applies to Buddhists, Hindus, Jains and Sikhs.

Muslim Law: Applies to Muslims

Indian Succession Act, 1925: Does not apply if deceased was a Buddhist, Hindu, Jain, Muslim or Sikh.

If there’s no valid will, the deceased’s estate will be divided among their heirs according to the relevant succession law that is applicable at the time of their death.

What is the need for a will?

Nomination is necessary. It allows the proceeds of the asset to be collected by the nominee. This could be in case of a savings bank account, a fixed deposit, an investment account, insurance policy, or an immoveable property etc.

However, the nominee is only authorized to hold these proceeds on behalf of the beneficiaries to whom these proceeds must ultimately be handed over. In other words, a nominee is a custodian of the assets of the deceased and facilitates the succession.

V. How to draft a Will?

  • The will can be either handwritten or typed and must be signed by the testator.
  • The will must be attested by at least two witnesses.
  • The wording of the will must be such that the intentions of the testator can be known from them. It does not require any technical words.
  • The property or assets being bequeathed through the will must be clearly described. E.g., Saving bank account, no XXX in XXX bank, XXX branch at XXX address.
  • The ratio of ownership of each of the assets or the amount being bequeathed, and details of the respective beneficiary (complete name, relation, if any, with the beneficiary) should be clearly mentioned and be specific.
  • The will should not consist of inconsistent clauses. E.g. “I bequeath my residential property XXX at XXXX 100% to my spouse XXX” and later in the will the same residential property is willed to another beneficiary.

VI. Conclusion – Other aspects of estate planning

  1. Power of attorney: These can be general or specific powers of attorney which allow you to appoint someone to act on your behalf for general or specific tasks. Durable power of attorney remains in effect even when the grantor is incapacitated.
  2. Considering and making provision for your digital assets like online accounts and digital files. Failing to do so can result in your digital assets being lost or left unclaimed.
  3. Updating your will to reflect changes in circumstances and priorities.
  4. Coordinate your estate plan in conjunction with your financial planning and risk management activities.

In conclusion, estate planning is an important aspect of personal financial planning that allows you to make arrangements for the management and distribution of your assets after your death.

No matter your age, it is a good idea to start thinking about estate planning so that you can provide for your loved ones and ensure that your wishes are carried out. By taking the time to plan your estate, you can give your loved ones peace of mind and security during a difficult time.

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