For hassle-free transfer of wealth from one generation to
another, it is essential that individuals focus on estate planning.
Family fights over the division of assets are often the
subject of movie plots and soap operas. Such disputes are an increasing
occurrence in the real world too.
In the last two decades, individuals have accumulated a lot
of wealth and hold a number of assets, but they do not devote equal attention
to estate planning.
For hassle-free transfer of wealth from one generation to
another, it is essential that individuals focus on estate planning.
What is estate planning?
Estate planning is concerned with the distribution of your
assets according to your wishes or preferences after your passing.
Nominate
The first and most simple step most of us can take to make
sure our wealth is passed on is to nominate beneficiaries for all of our
financial assets.
While buying insurance it is mandatory to fill in the
nominee's name. In mutual funds too, the application form allows for nomination
and investors must use it.
Even if you have not mentioned a nominee at the time of
investing, you can do so later.
Write a will
The easiest and simplest form of transferring wealth to
intended beneficiaries is by writing a will. The will takes effect upon the
death of the testator (the person who wrote it).
Any person over the age of 18 and in sound mind can draft
his own will. It is not mandatory that it should be written by a lawyer.
A will can be written on plain white paper in any style.
According to the Hindu Succession Act, there is no formal style for writing a
will. The succession of property may differ based on the religion and customs
of the testator.
An individual can also register the will. In Tamil Nadu, it
costs less than Rs 1,000 to register a will with the Registrar office.
Registration prevents tampering of the will as a copy is preserved with the
registrar.
Conditions
What assets can you will?
All assets accumulated through your own earnings — property,
jewellery, land, shares, deposits, cars and cash along with obligations and
liabilities — can be passed on through a will. For inherited property, a Hindu
can only distribute his share of assets to his legal heirs.
The person who is making a will should elaborately describe
assets and identify them.
If it is immovable assets, it is better to mention the
location and year of purchase. To avoid litigation in future, the testator
should legibly affix his signature at the end of the document with date in the
presence of the witness.
The will needs to be attested by two witnesses and it should
be signed in the presence of the testator. If the will runs into pages, the
testator needs to sign all the pages, whereas witness need sign only on the
last page.
The witness should know the contents of the will.
While writing a will, it should be remembered that a new
will always supersedes an existing document.
Review
It is important for the testator to review the will
periodically and particularly in the event of change in the family situation,
such as birth, divorce, marriage and addition to the wealth.
Probate
A probate is official recognition of the original will. As
per the Indian Succession Act 1925, in cities such as Chennai, Kolkata and
Mumbai, it is mandatory to probate a will. In the case of financial assets,
probate is necessary. However, finance companies and bankers say that in the
case of deposits, proceeds may be paid to the nominee, he is legally
responsible to assign benefits as per the will to beneficiaries.
Normally the nominee or the beneficiary applies to the court
for grant of probate.
The time taken to complete the process may be anywhere
between six months and three years.
On the demise of the investor, to effect the transmission of
shares, units or other financial assets in favour of the nominee, the following
documents will be required:
A letter from the nominee claimant to the Fund or Registrar
requesting for transmission of units. A format of the letter is available at
the Registrar and Mutual Fund web sites.
Death Certificate in original or a photocopy duly notarised
or attested by a gazetted officer or a bank manager.
Bank account details of the new first unit holder i.e. the
nominee along with attestation by the bank branch manager or a cancelled cheque
bearing the account details and account holders name.
The procedure is much the same for shares held in the investor's
name.
Source: http://www.thehindubusinessline.com/features/investment-world/article2883080.ece?ref=wl_opinion
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