Estate Planning: Do You Need It?

By Vibha Singh

In simple terms, estate planning refers to the passing of assets from one generation to another. Estate planning isn’t just for the affluent class, retired individuals, or senior citizens. Jitendra Shah, MD and CEO of a real estate development company in Mumbai, explains, “Estate planning is a process that involves identifying the title holder of your assets in case of your disability or death. It also caters to the future needs of your dear ones. In current times, it’s the type of planning one needs. Its key element is designating heirs for your possessions.”

How Does It Help?

On the benefits of estate planning, Anuj Puri, chairman of a real estate services company and property consultancy, opines, “The advantage is that it prevents disputes within the family if an explicit and rational distribution is done. One can also make provisions for minors and children with special needs and disinherit relatives who may be troublemakers. It also helps address the transfer of offshore assets.”

There is a misconception that registered nominees are beneficiaries of assets in the future. According to law, the beneficiary is the legal heir as stated in the will. In the absence of a will, the transmission of assets happens as per succession laws of the country. A nominee is just the trustee of your assets.

Minimise Taxes

Statutory changes have also necessitated the significance of succession planning. Currently, there is no concept of inheritance tax and estate duty in India; however, there is a demand for re-introducing these concepts. Thus, estate planning can help avoid legal hassles.

Neha Pathak, head of trust and estate planning of a private wealth management company, says, “If a person dies without drafting the estate plan, the family of the deceased may have to spend a lot of time, effort and money. Also, the court proceedings could last for a long time if the estate is contested. If you name responsible people as account beneficiaries (meaning people with no debts or disabilities), it could be a great way to avoid probate and its associated legal costs.”

How Is It Done?

Once you have identified your requirement, you can go ahead and create an estate plan. It can be done in multiple ways. It can broadly be classified into three modes which include wills, use of trust structure, and family constitution. Talking about the different means of estate planning, Vishal Yeole, vice president (family advisory) of a wealth management company, says, “In our experience, families have utilised either one or a combination of these modes to design their succession plans. The key is to conceptualise the structure with all agreed family principles. Typically, most families opt for a trust structure as it facilitates family succession and potentially shields it from estate duty implications. A trust structure helps ring-fence family assets from possible claims arising in future in relation to business and events such as divorce.”

– Times Property

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