2. • 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.
3. • 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
• 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.
4. • 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
5. • 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
• 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
• 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
• Oral wills – wills that are not documented and is made orally.
6. 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.
7. 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
8. 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 .
9. • 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
10. • 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
11. • 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
12. • 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.
13. • 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
• To sell any and all shares of stocks, bonds, or other securities.
• To file, sign all tax returns, insurance forms and any other
• 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
• To sue on behalf of the principal.
14. • 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.
15. • 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 /
• 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.
17. • 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
• 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.
18. 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
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
19. Point 1: in the following
case rates applicable to
Individuals will be
• If the trust has been
declared by way of a
will from which
business income is
• It is exclusively
declared for the
benefit of any relative
dependent on the
settlor for support and
• The trust is the only
trust so declared by
Point 2: in the following
cases rates applicable to
Individuals will be
• Where none of the
• Has taxable income
exceeding 250000 for
• Is a beneficiary under
any other private trust
20. • 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.