Most people fear the idea of estate planning or laugh it off thinking they are immortal. Estate planning is about ensuring your loved ones or a third party get access to your assets in a manner that you would want them to. Estate planning at its core is about putting arrangements in place for how your assets and estate will be managed and disposed of in case you die or become incapacitated.
Importance of estate planning
Startling statistics reveal that unclaimed assets worth ₹1.5 trillion are lying scattered across the country because families are not aware of them. Of this, ₹35,000 crore comprises unclaimed deposits of investors relating to 102.4 million accounts, which was transferred to the Depositors Education and Awareness Fund.
By writing a will and keeping it updated, one can keep their legacy secure and provide for future generations in their family line.
Key aspects
There are several essential components of estate planning that everyone should consider.
Will: A will is a legal document that lays out how you want your assets to be divided after you pass away. It’s your chance to specify who should receive what, appoint guardians for your kids and choose someone trusted to handle the distribution of your estate.
Trusts: Trusts are legal entities that hold assets on behalf of beneficiaries. They can be pretty handy in avoiding probate, minimizing estate taxes and ensuring ongoing care for your loved ones. There are different types of trusts to consider, such as revocable trusts, irrevocable trusts and special needs trusts. Each comes with its own needs, objectives and special purpose requirements.
Power of attorney: A power of attorney is a legal document that gives someone else the power to make financial or medical decisions on your behalf if you’re unable to do so. It’s super important to choose someone you trust to act as your power of attorney, ensuring that your affairs are handled the way you want them to be.
Healthcare directive: You might also hear this referred to as a living will or advance directive. This document lets you express your preferences for medical treatment in case you’re unable to communicate your wishes. You can spell out the kind of care you want or don’t want, including any life-sustaining measures.
One needs to appoint an executor of a will. Beneficiaries can also be executors. Where a bequest is made to a person by a particular description, and there is no person in existence at the testator’s death who answers the description, the bequest is void.
However, exception is made in case of lineal descendants, i.e. if the legatee dies before the death of the testator, the bequest will pass on the lineal descendant of such legatee and not lapse. If an unmarried person makes a will and thereafter marries, the said will would be considered as cancelled or revoked.
When you don’t have a will
Where a person makes a will for some of the properties only and leaves a balance, or where will is not found valid for whatever reason, such balance property shall devolve in accordance with the principles of intestate succession. Laws of intestate succession are different for Hindu, Muslims and Christians.
If you don’t make a will, intestate laws apply. These rules vary by gender and religion. For a Hindu married woman, for example, her parents are not tier-I heirs, and it is highly probable that they will not receive anything.
The areas for which you need smooth transmission of assets are: financial assets, non-financial assets, immovable assets, creditors, debtors, memberships, real assets, retirement benefits and investments.
Conclusion
Estate planning isn’t just for the rich. It’s important for anyone who owns assets and wants to ensure they’re distributed properly. Whether you have a large estate or modest holdings, having a well-crafted estate plan in place is crucial. It ensures that your loved ones receive their rightful share according to your wishes. Effective estate planning goes beyond safeguarding your financial legacy; it can also promote peace and harmony among your family members after you’re no longer around.
To sum up, estate planning is a crucial part of managing your finances that should not be overlooked. By taking proactive steps to create a comprehensive estate plan, you can safeguard your legacy, minimize taxes and provide for your loved ones’ future. Whether you are an experienced investor or a first-time homeowner, estate planning is an essential aspect of securing your financial future and bringing peace of mind to you and your family.
Dilshad Billimoria is founder of Dilzer Consultants, a Sebi- registered investment adviser.