Senior citizens and estate planning: 8 crucial mistakes to avoid

The premature transfer of property and assets to children during the senior citizen's lifetime should be avoided.

While an estate plan is crucial for an individual who wishes to pass on his assets to a loved one, it is even more so for senior citizens, as there is a greater probability of illness, disability or demise.

In the first part of this special series, we discussed 10 estate planning tips for senior citizens. A well-documented estate plan can prevent family disputes and ensure harmony and peace, even after your lifetime. Therefore, act today.

In this second part, let’s discuss some common mistakes senior citizens must avoid.

Lack of communication

Many senior citizens tend to keep their estate plan a secret as they fear its disclosure may disturb family peace.

“This, more often than not, renders the inheritors clueless about the plan and are left with no choice but to follow the intestate succession laws,” said Sneha Makhija, head of wealth planning, products & solutions at Sanctum Wealth.

Hence, it is crucial to make your inheritors aware about your plan.

It is important to appoint an executor and let them know about your estate plan. “Make sure she knows the practical facts, including the name of the attorney and where the Will is stored,” said Vishnu Chundi, Founder and CEO, AasaanWill.

Unclear drafting of the trust deed

Senior citizens can protect their assets by keeping them in a trust. After including the assets, one can list their beneficiaries and what share of assets each beneficiary will get after his death.

“It is important that the trust deed is clearly drafted and reflects the intent of the client in a clear way, rather than using complicated legal language,” said Hemang Parekh, Partner, DSK Legal.

Don’t transfer property during your lifetime, make a Will

Senior citizens should avoid the mistake of gifting a self-occupied house or rent-bearing property to their children during their lifetime. “As far as possible, they should bequeath these properties through Will,” said Shailendra Dubey, Partner, PlanMyEstate Advisors LLP.

Also, the premature transfer of property and assets to children during the senior citizen's lifetime should be avoided.

“While this may be well-intentioned, it can lead to a lack of incentive for the children to treat their parents well. Opting for a Will instead of immediate transfers can be a better guarantee for the senior citizen's well-being,” said Bharat Chugh, Advocate, Supreme Court, and former Judge.

Senior citizens might feel that they have grown “too old” and transfer their property to their children prematurely. But relations can turn sour and the senior citizen might live on for a few years more, thereby exposing them to possible duress.

Failure to designate nominees for financial accounts

Often some senior citizens don’t designate nominees for their bank accounts and other securities.

“In the absence of a Will, this oversight can make it challenging for heirs to claim and manage the assets, potentially causing delays and legal complications,” said Chugh. If one has minor children, a guardian, who will take care of property till the children turn major, can be chosen.

Sometimes, senior citizens tend to nominate their domestic help or some random relatives, if their children are living abroad. Such nominations haunt the legal heirs later when it comes to transferring assets. Remember, although the legal heirs are the real owners of the assets, most banks hand over the money to the nominees as they are the trustees. It is up to the Will and the legal heirs to execute the Will and ensure that the assets get passed down to the rightful heirs.

There are instances of senior citizens not planning wealth management. “Senior citizens who fail to plan ahead or execute their Will timely (and before their death) often land their families in disputes,” said Shashank Agarwal, Advocate, Delhi High Court.

Neglecting to update estate plan at regular intervals

After creating your estate plan, do not put it in a drawer and forget about it. It is important that you keep reviewing and updating the documents in a timely manner. “Trigger events, such as birth, demise, marriage, change of citizenship status, etc., can serve as reminders to re-look at your estate plan and update it in light of the changes in your life,” said Makhija.

“Failing to revise the estate plan can lead to unintended distribution or exclusions,” said Chugh.

Failing to appoint power of attorney

It is also important that senior citizens make sure that a general power of attorney (POA) is put in place.

PoAs are created by someone who cannot do the transaction by himself/herself due to various reasons, such as illness, old age, overseas residence, etc. These transactions could be related to property, banking, tax payments, legal and judicial proceedings, financial investments, etc.

Not appointing a PoA for financial and healthcare matters is a common oversight. “In the event of incapacitation, having a trusted individual designated with the authority to make important decisions on their behalf can be crucial for a senior citizen's well-being,” said Chugh.

After appointing a POA, do not repose blind faith on them. “Imposing too much trust on one person, leaving out the rest of the family members, tends to create disharmony in the family,” said Agarwal.

Also read | How to draft a functionally sound power of attorney

State Living Will clearly

A Living Will is a legal document that enables individuals to gain control over their medical decisions when they can no longer communicate.

This document should be clearly and unambiguously written. “The Will should mention that the person making it is aware of the consequences of making a Living Will and the individual’s preferred treatment style,” said Purvi Asher, Partner, Mansukhlal Hiralal & Co., Advocates & Solicitors. The Living Will should say at what point the treatment should be withdrawn, she said.

It must enlist the name of the person or appoint an executor to take a decision on behalf of the person making a living Will, in case the latter is not capable of doing so. Further, it should consist of clear directives such as the mode of financing the treatment, preferred place of treatment and so on.

Registering a Will

Registering a Will adds a layer of formality and can prevent doubts raised by heirs in the future. “If the relationship of the legal heirs is acrimonious, write your Will in your handwriting and get it registered,” said Ankur Mahindro, Managing Partner, Kred Jure.