Presented by

Neelutpal Saha

Vishal Gupta

Shan Lal

• Estate planning is an integral part of the process of financial

planning. The concept of estate planning is best understood as

a process of making proper arrangement for the Protection,

Preservation and Provision of a person’s total assets for the

benefit of his or her family and loved ones. Estate for the

purpose of estate planning can be simplified to mean all the

property and the property rights that a person owns.

• The estate owner who wishes to pass on his estate to his legal

heirs is called as the ‘Testator’. If the testator dies without

leaving a valid will behind, he/ she is said to have died

intestate.

• The Hindu Succession Act, 1956 (the HS Act) was enacted to

reform and codify the Hindu law of intestate succession.

• The HS Act defines a person to have died intestate in respect

of 223 that property of which he or she has not made a

testamentary disposition capable of taking effect. Upon

interpretation of this definition, it can be interpreted that if a will

made by a Hindu is found to be invalid, then such a person is

also deemed to have died intestate.

• A will is explained as a legal declaration made in writing by a

person who clearly sets out the manner in which he/ she

would like his or her property (movable or immovable)

wherever situated to be distributed after his death. A will

therefore is a document which comes into effect the moment

its maker dies. Therefore till the time a will comes into force, it

can be cancelled, revoked and varied to suit the maker’s

circumstances.

• Individual Will – One of the most common and accepted form

of will, where the will is individually written.

• Holographic will – a will which is wholly in the handwriting of

the testator.

• Conditional will – a will that is expressed to take effect only in

the event of happening of some contingency.

• Joint Will – when 2 or more persons make a joint declaration

regarding their properties in one document and the document

is executed in accordance with the formalities laid down by the

law.

• Living wills – a written statement made by a person directing

the doctor who may be treating him to discontinue treatment if

the treatment is only to artificially prolong his life in a terminal

illness situation.

• Oral wills – wills that are not documented and is made orally.

Such wills are mostly prevalent in the defense services.

Not understanding what a joint account means

• If you want to make sure that after your death, your wife operates the account and should be the sole owner of the account then don’t just make her the nominee, better make her a joint account holder in the bank account itself. If you choose “either or survivor” mode, she will be able to transact and do things along with you. But if you want to make sure that she can only operate and take charge once you are not around, then choose “former or survivor” mode, so she will not be able to transact and own anything till you are alive, but once you are no more, she just becomes the owner, without any hassles. This is a better way to give control to someone after your death and more powerful and simple than making a WILL or leaving it on the mercy of fate. You can make some person joint holder in bank accounts, mutual funds, FD’s or real estate properties.

Forgetting about old joint holders

• A lot of people have joint accounts with their father, mother, brother etc years back, but now they want to pass on their wealth to their children/wife on their death, so they put their names in Nominee and also write a WILL (for full proof documentation), but once they die, the nomination and WILL be of no use, because the bank account is not dormant, it’s still alive with a legitimate owner and that will be the person who was the joint owner. You might have opened that bank account long back before marriage with your brother or father as joint holder and now forgot about this, but they are next legitimate owner of the bank account (or anything else). Note that nominations are useful to pass on the control only when no one is to claim it and WILL are to transfer the rights to someone after the owner is dead, but incase a joint account is there, the control can be passed only on the death of both the holders , not just the primary or secondary holder.

Not changing Old nominations and WILL

• A lot of people do not change the nominations of their bank

accounts, mutual funds, life insurance policies due to

lazyness, someone else is on the nominee list, but they want

to transfer the asset to some one else. A lot of people think

that making a WILL is the final solution, but in real life, there

can be complications. What if nominee and the person

mentioned in a WILL are different ? The nominee can take out

the cash from bank or do some transaction ? Then the legal

owner will have to run from pillars to post to claim that money

back and do all the legal work .

• If you are 100% sure that your wealth should go to some

specific person, always have a joint account with that person

with you as primary person.

• Make sure your nominee should be the same person you want

to pass on some policy proceeds or property, It does not make

sense to say in WILL that your wealth should go to A , but in

nominee the name mentioned is B .

• If you have opened any accounts/properties/mutual

funds/policies long back , its a good idea to revisit it and see

that the nominee name is appearing and is consistent with

what you want it to be

• A property when acquired by a person and on becoming the

rightful owner of the property should ensure that all the titles of

the property are transferred in his name.

• Mutation refers to a significant alteration or substitution of the

name of a person by the name of another in relation to the

record showing the right or title to the property. Mutation helps

in proper updation of the revenue records to ensure proper

collection of revenue from the person who is in possession of

the property.

• A Power of Attorney (POA) is an instrument by which a person

may formally authorize another person to act on his behalf or

as his agent on all matter or for a specific transaction or

particular types of transactions.

• There are two parties to a POA – Donor and the Donee. Both

the parties to the POA should have attained majority, be of

sound mind and competent to contract.

• A will comes into effect on the day person die. A POA applies

during a person’s lifetime and ceases to apply when he dies.

So you actually need both a POA and a will as they

complement, and do not overlap, each other. There are two

types of POA: one for property and one for personal care

• General Power of Attorney: A general power of attorney is one by which an instrument is executed by the principal authorizing the agent to do certain acts in general on his behalf. The word ‘General’ here means that the power must be general regarding the subject matter and not general with regard to powers in respect of a subject matter. If the subject matter is not general but restricted to something either specific or specifically mentioned by the principal while drafting an instrument then it will not constitute a general power of attorney. It is otherwise called as limited power of attorney.

• Special Power of Attorney: A special power of attorney is one by which a person is appointed by the principal to do some specified act or acts. In this type of power of attorney, an agent conferred with a power to do specific act in a single or specified transactions in the name of the principal.

• Durable Power of Attorney: A Power of Attorney which specifically says otherwise, agent’s power ends if principal become mentally incapacitated. However, a power of attorney may say that it is to remain in effect in the event of future incapacity of the principal. A power of attorney that says this is called a durable power of attorney.

• To execute all contracts, deeds, bonds, mortgages, notes,

checks, drafts, money orders.

• To manage, compromise, settle, and adjust all matters

pertaining to real estate.

• To lease, collect rents, grant, bargain, sell, or borrow and

mortgage.

• To sell any and all shares of stocks, bonds, or other securities.

• To file, sign all tax returns, insurance forms and any other

documents.

• To enter into contacts, and to perform any contract,

agreement, writing, or thing to make, sign, execute, and

deliver, acknowledge any contract, agreement.

• To make health-care decisions for the donor or his minor

children.

• To sue on behalf of the principal.

• A trust is created where the absolute owner of property (known

as the Settlor) passes the legal title in that property to a

person (the Trustee) to hold on trust for the benefit of another

person (the beneficiary) in accordance with the terms set out

by the Settlor.

• Trusts are often used as vehicles to hold property for present

or future needs of dependents and family members, and

sometimes also used to reduce the burden of Taxes. Common

example of a trust is one that provides for accumulation of

income and capital for specified children.

• Retirement trusts are commonly set up by the employers to

provide retirement benefits to employees.

• The Indian Law classifies trusts only on the basis of their purpose, namely private purpose (Private Trust) or public purpose (Public Trust) and religious/charitable (Religious / Charitable Trust).

• A Public Trust is for the benefit of the public and the beneficiaries are incapable of ascertainment and a private trust is created for benefit of certain specified individuals who are ascertained or are capable of being ascertained.

• Besides the classification on the basis of purpose of trusts, trusts can also be classified as either revocable or irrevocable in nature. A Trust created hands of the creator of the Trust i.e. the Settlor. The tax imposed would be at the rates applicable to the Settlor. In case of an irrevocable Trust, the income of the Trust is taxed in the hands of the beneficiaries. The tax imposed would be at the rates applicable to the Beneficiaries. However, if the beneficiaries are not determined at the time of executing the Trust Deed then the Trust would become a discretionary trust and any income of such a Trust would be taxed at maximum marginal rate.

• Estate Protection because a Trust is a bankruptcy remote structure.

• Self Beneficiary -The person who creates the Trust can himself be

one of the beneficiaries and enjoy the benefit of his own estate

during his lifetime.

• Efficient Succession Planning by providing for children, grand

children and great grand children.

• Management of all types of assets through expert advisors.

• Accumulation of the Estate during the lifetime and post death through

the hands of Trustees.

• Avoidance of family disputes leading to disintegration of family

businesses.

• Retaining confidentiality, as obtaining a Probate is not necessary.

• Causing efficient management of the Estate as a trust can be made

operational during the lifetime and post death of the Client.

• Providing for future administration of assets to protect against future

incapacity and for incapable beneficiaries.

• Lower Contestability as compared to a Will.

Taxation of trusts

• Subject to the fulfillment of specified conditions, a public trust is exempt from

tax if the income is applied for charitable or religious purposes. Approved

retirement trusts are also exempt from tax. In the case of private trusts, if the

individual shares of the beneficiaries are ascertainable, they are included in

the individual taxable incomes, the tax assessment being made either

directly on the beneficiary or on the trustee as a representative of the

beneficiary. However, if the trust has income from business, the entire

income from the trust is taxed in the hands of the trustee at the maximum

marginal rate applicable to individuals unless the trust is created by will for

the benefit of relatives. When the individual shares of the beneficiaries are

indeterminate (i.e., discretionary trust), the entire income is taxed din the

hands of the trustees, in most cases at the maximum marginal rate

applicable to individuals.

Taxation of beneficiaries

• Where tax on a discretionary trust is assessed in the hands of the trustee,

after-tax distributions to the beneficiaries are exempt from tax in their

individual hands.

Tax treatment of settlor / grantor

• If the trust effectively alienates income from the settlor/grantor, income tax

liability thereon will be avoided. However, the settlor/grantor continues to be

liable to income tax on income from the settled property to the extent that it

is for the immediate or deferred benefit of a spouse or minor child. The

transfer of assets to the trustee maybe subject to gift tax. Stamp duty is

Point 1: in the following case rates applicable to Individuals will be charged:

• If the trust has been declared by way of a will from which business income is derived; and

• It is exclusively declared for the benefit of any relative dependent on the settlor for support and maintenance; and

• The trust is the only trust so declared by the settlor.

Point 2: in the following cases rates applicable to Individuals will be charged:

• Where none of the beneficiaries

• Has taxable income exceeding 250000 for ay 14-15

• Is a beneficiary under any other private trust

• Though planning one’s estate may feel uncomfortable, the

cost of procrastination can be high. Though some people are

put off by the belief that estate planning will be complicated,

time consuming and costly, setting up an estate plan doesn’t

have to be a complex process.

• Estate planning is the foremost judicious step in securing your

family’s future and fulfilling your desires during your life and

after you depart from the world.