Plan the Es­tate You Want to Pro­tect

Accommodation Times - - Real Estate Investments - By Payal Parikh, Part­ner, ANB Le­gal

“Will could be a very per­sonal doc­u­ment and show­case an in­di­vid­ual’s love, care opin­ion and feel­ings to­wards loved ones. An in­di­vid­ual may even dis­in­herit his or her nat­u­ral heir.”

What is an es­tate plan?

The pri­mary goal of es­tate plan is to pro­tect, preserve and man­age one’s as­sets dur­ing and post one’s life. Har­mo­nious and planned suc­ces­sion of es­tate helps to en­sure that the money and as­sets go to the peo­ple one chooses. With­out an es­tate plan the as­sets are passed on ac­cord­ing to re­li­gion based suc­ces­sion laws. While a Trust and Will are im­por­tant tools to any es­tate plan, the key is to ac­tu­ally have a co­or­di­nated, thought-out plan for ones as­sets, per­sonal care, and fu­ture. Once an over­all plan is de­vel­oped, then the nec­es­sary doc­u­ments can be drafted to put that plan into ac­tion (such as cre­at­ing a Trust and Will). Es­tate Plan­ning is thus a process by which an in­di­vid­ual de­signs a strat­egy and ex­e­cutes a will, trust or other doc­u­ments to pro­vide for the ad­min­is­tra­tion of his or her as­sets upon his or her in­ca­pac­ity or death. Tax and liq­uid­ity plan­ning are es­sen­tial parts of this process.

Need for Es­tate Plan­ning

Cre­at­ing a proper es­tate plan may be the most im­por­tant thing one can do to pro­tect his as­sets and the fam­ily. An es­tate plan has nu­mer­ous ben­e­fits, both dur­ing and af­ter death. First, dur­ing the life, the plan pro­vides a pre­de­ter­mined di­a­gram of who will over­see the as­sets and how such over­sight will take place in the event of in­ca­pac­ity. With­out such a plan, the well-be­ing of one­self along with the as­sets would be left to the de­ter­mi­na­tion of the Courts. Ad­di­tion­ally, af­ter death, a proper es­tate plan pro­vides for ones loved ones by set­ting out in an or­derly, pre­de­ter­mined man­ner how his or her as­sets will be held, ad­min­is­tered and ul­ti­mately dis­trib­uted. Such an es­tate plan can pro­vide for the fam­ily with­out putting them through costly and time-con­sum­ing court in­ter­ven­tion. How­ever, time is of the essence, be­cause one must plan dur­ing one’s life­time and while he or she still has the ca­pac­i­ta­tion to do so. Se­ri­ous ac­ci­dents or ill­nesses may oc­cur at any time and when least un­ex­pected, so it is never too late on cre­at­ing an es­tate plan to fit your needs.

Modes of Es­tate Plan­ning Power of At­tor­ney

Dur­ing one’s life time Power of At­tor­ney is a le­gal ar­range­ment which au­tho­rises an­other per­son to act on one’s be­half. There are two types of power of at­tor­ney: ( i) gen­eral or fi­nan­cial power of at­tor­ney which en­ables an­other to man­age as­sets and money and (ii) spe­cific power of at­tor­ney for ex­am­ple med­i­cal power of at­tor­ney au­tho­ris­ing an­other who will take health care de­ci­sions if one is not able to take them by him­self /her­self.


Is the tra­di­tional way of pass­ing as­sets ei­ther earned or in­her­ited from an­ces­tors to one’s fu­ture gen­er­a­tions ac­cord­ing to one’s wish. The term ‘Will’ is de­fined un­der Sec­tion 2(h) of The In­dian Suc­ces­sion Act, 1925 and means the le­gal dec­la­ra­tion of the in­ten­tion by which a per­son, the tes­ta­tor, names one or more per­sons (ex­ecu­tors) to man­age his es­tate and pro­vides for the trans­fer of his prop­erty at death to the named per­sons (ben­e­fi­cia­ries). A well drafted Will en­ables an in­di­vid­ual to make be­quests to cater to spe­cific need of one’s fam­ily for ex­am­ple make ex­tra pro­vi­sion for dif­fer­ently abled child, choose a guardian for his/her mi­nor chil­dren or pro­vide for chil­dren from pre­vi­ous mar­riage or be­queath as­sets to dear friends or faith­ful ser­vants or give to char­ity. It is im­per­a­tive to make a prop­erly writ­ten and legally bind­ing Will to avoid the risk of con­test thereby leav­ing fam­ily with noth­ing but a legacy eaten away by le­gal bills or un­nec­es­sary bit­ter­ness. A Will to be a valid one needs to sat­isfy the fol­low­ing con­di­tions: • The will must be in writ­ing made by a per­son who is a ma­jor, of sound mind and with free con­sent; • The will must be dated and signed by the tes­ta­tor or by some other per­son in the tes­ta­tor’s pres­ence and at his di­rec­tion; • The will must be at­tested by two or more per­sons (prefer­ably one of whom may be a no­tary pub­lic and sec­ond one a doc­tor) pro­vided that the at­test­ing wit­nesses and their spouse are not ben­e­fi­cia­ries un­der the will; • The doc­u­ment must be a dec­la­ra­tion of in­tent of the tes­ta­tor with re­spect to his prop­erty; • The doc­u­ment must spec­ify that his in­tent should be car­ried out af­ter the tes­ta­tor’s death; • There must be a dis­po­si­tion of prop­erty un­der the doc­u­ment. The Will should clearly set out the prop­er­ties in­tended to be trans­ferred and should also set out that the doc­u­ment has been ex­e­cuted with­out co­er­cion or un­due in­flu­ence or im­por­tu­nity; • Will could be a very per­sonal doc­u­ment and show­case an in­di­vid­ual’s love, care opin­ion and feel­ings to­wards loved ones. An in­di­vid­ual may even dis­in­herit his or her nat­u­ral heir. Case laws in­di­cate that where one of the nat­u­ral heirs is to be dis­in­her­ited, the tes­ta­tor must set out clear rea­sons as to why the tes­ta­tor wishes to dis­in­herit such in­di­vid­ual; • Reg­is­tra­tion of will is op­tional; • Will writ­ten by hand on plain pa­per is valid and does not have to be on stamp pa­per.


The trust as a ve­hi­cle to con­duct busi­ness and man­age suc­ces­sion is also be­com­ing a pre­ferred choice, since it dis­penses with pro­bate or any po­ten­tial lit­i­ga­tion that may arise out of a Will. A trust may be used in­stead of a Will to trans­fer as­sets where di­rect or im­me­di­ate trans­fer is not pos­si­ble due to cer­tain rea­sons and the pur­pose is to pro­tect in­ter­est of ben­e­fi­cia­ries. It is a po­tent means of trans­fer­ring wealth within the fam­ily in sit­u­a­tions where the trans­feror has sub­stan­tial as­sets or com­plex fam­ily af­fairs and busi­nesses. It en­ables busi­ness fam­i­lies to man­age the busi­ness through pro­fes­sional ex­perts to pro­tect the busi­ness and at the same time pro­vide for the needs of all the fam­ily mem­bers. Be­sides as­set pro­tec­tion, form­ing trusts is a pre­ferred op­tion (a) for safe­guard­ing the in­ter­ests of fam­ily mem­bers, es­pe­cially those with spe­cial needs, of chil­dren, grand­chil­dren and great grand chil­dren and pro­tect against fu­ture in­ca­pac­ity and for in­ca­pable ben­e­fi­cia­ries, (b) per­son mak­ing the trust can be ben­e­fi­ciary and en­joy ben­e­fit of his own es­tate dur­ing his life­time, (c) man­age­ment of all types of as­sets through ex­pert ad­vi­sors and at­tach­ing con­di­tions to gifts, (d) avoid­ing fam­ily dis­putes over the prop­erty, ( e) lower con­testa­bil­ity as com­pared to Will by avoid­ing the pro­bate process while en­sur­ing suc­ces­sion from one gen­er­a­tion to an­other, (f) giv­ing fu­ture gen­er­a­tion the ben­e­fits of fam­ily wealth with­out los­ing con­trol over key as­sets, (g) achiev­ing tax ef­fi­ciency and (h) bankruptcy re­mote struc­ture.

It is im­per­a­tive to make a prop­erly writ­ten and legally bind­ing Will to avoid the risk of con­test thereby leav­ing fam­ily with noth­ing but a legacy eaten away by le­gal bills or un­nec­es­sary bit­ter­ness. A Will to be a valid one needs to sat­isfy the fol­low­ing con­di­tions

Trusts in In­dia are gov­erned by the pro­vi­sions of the In­dian Trusts Act, 1882. A Trust as per the In­dian Trusts Act is “an obli­ga­tion an­nexed to the owner- ship of prop­erty, and aris­ing out of a con­fi­dence re­posed in and ac­cepted by the owner, or de­clared and ac­cepted by him for the ben­e­fit of an­other, or of an­other and the owner” Trusts can be ei­ther as (i) re­vo­ca­ble (can be re­voked (can­celled) by its set­t­lor at any time dur­ing this life); (ii) ir­rev­o­ca­ble (this trust will not come to an end un­til the term/ pur­pose of the trust has been ful­filled); (iii) dis­cre­tionary (where the trustee may choose, from time to time, who among the ben­e­fi­cia­ries is to ben­e­fit from the trust, and to what ex­tent); (iv) de­ter­mi­nate (where the en­ti­tle­ment of the ben­e­fi­cia­ries is fixed). The choice of the type of trust de­pends on the ob­jec­tives that the set­t­lor wants to achieve. For ex­am­ple, an ir­rev­o­ca­ble dis­cre­tionary trust is a choice for as­set pro­tec­tion; a re­vo­ca­ble trust is used when the set­tler does not want to give up con­trol on the as­set set­tled. How­ever, the tax im­pli­ca­tions for each kind of the trust would have to be con­sid­ered keep­ing the needs and de­sire of the tes­ta­tor and his/her fam­ily. It may be noted that the re­vo­ca­ble trusts don’t re­ceive the same tax shel­ter ben­e­fits as ir­rev­o­ca­ble ones do.


Gift is an­other mode through which the dis­po­si­tion of wealth can be made to the le­gal heirs. One of the im­por­tant con­di­tions, how­ever, to be kept in mind is that the gift has to be made dur­ing the life­time of the donor. Ex­e­cut­ing a gift deed or re­lease deed in­stead of Will or trust may be a vi­able op­tion to pass on im­mov­able prop­erty sit­u­ate in some In­dian states tak­ing ad­van­tage of re­duced stamp duty ap­pli­ca­ble in case of re­lease or gift to near rel­a­tives. Es­tate plans are there­fore, vi­tal for ev­ery­one, whether you have a large or small es­tate, rich or poor. With proper, ju­di­cious and well thought plan­ning, would thus not leave ones’ fam­ily mem­bers un­pro­tected.

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