A will has to be executed by the testator, by signing or affixing his thumb impression on it
Estate planning is the process of anticipating and arranging, for the management and disposal of a person's estate, during the person's life and at and after death. Estate planning is a broader term for planning and process while the tools for doing estate planning are (i) will writing and (ii) creation of trusts. Let us now understand each of them in detail.
1. Estate Planning
In a layman’s term, estate is the net worth of a person at any point in time dead or alive. It includes properties, cars, stocks, paintings, life insurance, pensions and debt. Individuals have various reasons for planning an estate such as preserving family wealth, providing for surviving spouse and children, funding children and/or grand children’s education or leaving their legacy behind to a charitable cause.
How do you start?
• List down all your assets and debts. It’s a good practice to mention the account numbers, location of assets, etc.
• Develop a contingency plan wherein you will provide guidelines for managing your assets if you or your partner becomes incapacitated. This includes the strategy to provide for income.
• Provision for dependants is the primary concern, to protect your loved ones and their future needs. One must include the name of guardian if children’s age is below 18.
2. Will Writing
A will/testament is a legal declaration of a person’s/testator's intention with respect to his property which he desires to be carried into effect after his death. Thus, a will operates only after the death of the person. Every individual who is major, of sound mind and with free consent, is capable of making a will. Let the age and the bad health not be the deciding factor for making a will.
A will has to be executed by the testator, by signing or affixing his thumb impression on it. It should be attested by two or more witnesses, each of whom should have seen the testator signing the will. The burden of proving that the maker of a will did so freely and when capable of making the will is upon the individual who propounds the will.
A will, obtained by force, coercion or undue influence is void as it takes away the free consent of the person. A registered will may not be the last testament. A new will made, even if unregistered, if valid, will trump the registered will.
In case a person dies without making a will, the law of succession provides for a category of persons and a percentage of property that will devolve on each such person.
To avoid such distribution, one must always make a will to pass on your property as per your wish.
3. Creating a TRUST
A trust involves executing a trust deed, transferring of one’s estate to a trustee for the benefit of certain beneficiaries which may include the person creating the trust who is called the settlor /author of the Trust.
Types of Trusts
There are three types of trusts, namely private, public and charitable or religious trust. Further, a trust can be a revocable or irrevocable. If the same is made under a will, then it may be revoked at the pleasure of the person writing the will.
A trust provides for management of the estate during one’s lifetime and also provides for distribution and management of one’s wealth post demise in a planned manner over a period of time.
In case of a trust, you transfer the ownership of some or all of your assets in the name of the trust. After you transfer the assets, you can have access and control as you did before in case of a revocable trust. You can also appoint yourself to be one of the beneficiaries and enjoy the benefit of your own estate during the lifetime. In irrevocable trust, you can retain the control by having the trustee consulting you/by appointing an administrator/protector who will be consulted.
There is no requirement of getting probate for the trust. Hence, it retains the confidentiality. You lose nothing but gain assurance that your wishes will be carried out if something happens to you without hassles of probate.
Which one is better – Creation of Trust or Writing a Will ?• A living trust will allow you to control what happens to your assets during and after death
• Unlike a will, a living trust is not public record. Furthermore, you can use a living trust regardless of the size of your estate.
• In case of Will you need to get the probate which is a much tedious and time consuming process
• A disgruntled heir has the ability to challenge the trust as well as Will.
There are numerous advantages to a living trust, with the most important being avoiding probate which is a must in case of WILL.The author is CEO & Co Founder of FinPeace TechnologiesThe Great Diwali Discount!
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