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Estate PlanningPersonal Wealth ManagementGroup 6Shagun Gourisaria, 211133Shantanu Mittal, 211134Sonal Sharma, 211141T N V M Ravindra Mohan, 211146

What is an Estate?What is Estate Planning?Individual arranges the transfer of assets to the legal heirs This is done to protect the needs of the loved ones in case of his/her death or some disabilityIt includes the distribution of the real and personal property of an individual to his/her heirs Aim is to preserve the maximum amount of wealth possible for beneficiaries and flexibility for the individual prior to his deathObjectives of Estate PlanningTo develop a plan detailing of ones wishes as to how to use and distribute the wealth

To prepare for future illnesses, disability or retirement

To transfer property to intended, rather than unintended, beneficiaries both before and after death

To ensure tax deduction on such transfer of wealth

Business succession organized succession or winding up can be defined in case of an individual handling business

Time of distribution can be pre decided : individuals having minor children may wish to transfer the assets only after the children attain a certain age , to avoid misuse that may happen due to lack of maturity and discretion

Objectives ContinuedSelection of trustee or guardian or executor : An individual needs to be appointed to carry out functions likeTo pay for funeral expenses Paying all the expenses and outstanding debtsArranging for filing tax returnsEnsuring all the benefits due to the deceased such as life insurance, pension and other benefits are receivedApplying for probateDistribution of assets to the beneficiaries as per individuals wish

To provide for the guardianship of minor children upon death or incapacity

Estate Planning vs. Real Estate PlanningEstate Planning = Real Estate Planning Estate = Real Estate + Investments + Insurance Policies + Savings + .Parties to Estate PlanningTestator (Individual whose asset has to be transferred)

Beneficiary

Executor

Tax advisor

Lawyer

Life insurance companies

Banks

Courts

Witness

executorn. the person appointed to administer the estate of a person who has died leaving a will which nominates that person.10Tools of Estate PlanningDuring the LifetimeTrustPartitionGiftPower of AttorneyTestamentoryLivingRevocableIrrevocableBenefits of TrustTrust is a non-probate and private instrument

Assets in an irrevocable trust are protected from the settlors creditors

A trust can be structured to distribute assets to a beneficiary periodically

A trust can ensure the right person benefits from the assetsGifts: Under Income TaxIn the Income Tax Act 1961 under section 56 (2),any gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 in a year would be taxable.

Exemption from Gift Tax:The gift being given by a blood relative, irrespective of the gift valueImmovable properties located outside the countryGifts received from relatives on the occasion of marriage (including gifts received by daughter-in-law from parents-in-law; but excluding gifts received by son-in-law from parents-in-law)Gifts received by way of a will and inheritanceNRIs gifting parents in India from their NRE account

Tools continuedPost- DeathSuccessionLife insuranceWillConditionalMutualJointUnpriviligedPriviligedDifferencesWillGiftTransfer of assets takes place after the death of the testatorTransfer of assets during the life time of the testatorRevocableIrrevocableTestator has the ownership of the assetsOwnership is transferred to the beneficiaryNot riskyRisky since a person gives all his assets during his lifetimeDifferencesWillNominationThe beneficiary is the sole owner of the assetsThe nominee is not the sole owner of the assetsThe other beneficiaries cannot make a claim in the assets not transferred to them.The other heirs can make a claim on the assets transferred to the nomineeKey Issues to be considered in estate planningWho do you wish to be the executor of your estate? Who do you wish to be your Power of Attorney?Who would you wish to be the Guardians of your minor children?Do you expect there to be any challenges to your wills?Are there any particular assets which you would like to leave to specific family members?The will prepared, hand written or typed, should be legible.Do you need the help of a legal professional?Is will overriding the natural succession of natural wealth?Are assets being bequeathed to people other than natural heirs?Are the witnesses chosen carefully?How to bequeath your digital assets?

Estate Planning ProcessA financial planner performs the following steps:

Relationship establishment

Information gathering

Determining the clients financial status

Draw out a plan of transfer

Implementing the plan

Regular reviewing of the plan

Risk Involved in Estate PlanningHuge costs of transfer and taxes might be incurred if planning is not properly

Inadequate information while planning might result in intended beneficiaries to take up legal process in order to possess the assets of the individual

Absence of smooth transition and functioning of assets after the individual expires might result in depreciation of value of assets

An individuals wishes on how his/her assets are to be distributed may not be fulfilled

There may be insufficient liquidity to meet the individuals debt obligations and taxes

An individuals family may be in financial distress if the process is not planned properly

Risk Mitigation StrategiesIdentifying various scenarios/ events which could require Estate planning such as divorce, disability, death etc.

Identifying specific goals and determining them

Making a checklist of assets and liabilities, beneficiaries, executor and other aspects of Estate planning

Consulting to aging parents and other beneficiaries about Estate planning

Reviewing the plan periodically while updating to new tax laws and legislations

Establishing benchmarks to evaluate the plans success

What is a Will?The legal instrument expressing a persons wishes and directions as to the disposition and distribution of his/her property after death.

We can make the will on plain paper in India. Its not legally necessary to make the will on stamp paperious

Previous will can be edited as many times a person wants through a codicil or making a new oneWho is Eligible to Make a Will?Major

Sound mind

Willing to write a Will

A Will can be made by the deaf and dumb person by showing consent through writing or gestures in sign language.

A prisoner or alien in India can also draw a Will.

When to Make a Will?First step in our financial life

Now

Why to make a Will?Sample Will: 4 Parts1. Declarations1. I, the undersigned ____________________ aged about ___ years, _________________ by profession, residing at __________________.I hereby revoke___________________________________________, hereby make my Will, any other Will or Wills of earlier dates that may beclaimedto be in existence, I state that I am in soundinmind and I am making this will because I do not wish to cause difficulties to my beneficiaries by dying intestate. I make this will on my own and without pressure or influence from anyone. I ammarriedto ______________________________________; I have ____ children, one son __________________________ and onedaughter_______________________, hereinafter referred to as my children.

Sample Will: Cont.2. Assets and properties ownedBy thisWill and TestamentI bequeath to my son ___________________ anddaughter_______________________, my plot of land situated at __________________________________ and other contents therein all of which they may divide into two equal parts, as near as may be as per their mutual agreement. They shall have absolute ownership and possession of this property, where I at present reside, and may dispose of it in whatever manner they desire, during their lifetime, and thereafterthe propertyor whatever is left of it shall pass to their heirs or designated inheritorsSample Will: Cont.3. Distribution of the properties

The remainder of my assets moveable and immovable shall be divided into two equal parts, as near as may be. One part I bequeath to my son __________________________ and the other to mydaughter_____________________________. These properties may be utilised as may be deemed fit by my children ____________________ and _______________________ and by their inheritors or heirs after them. In the event of premature demise of any of the legatees, the properties allotted to them shall pass to their children and if there are no surviving children, these properties shall pass in equal measure to their heirs or designated inheritors.

Sample Will: Cont.4. SignaturesI appoint _____________________________ who has accepted the responsibility, as the executor of this will. He may /may notrelegate thisfunctionto any other person of his choice, ifrequiredor desired.Signatureof _______________________ (Testator)(Name of Testator)________________________, in our presence, signed thisinstrumentafter declaring to us that it is her/his Will and we now sign in her/his presence and of each other as witnesses on this above written day and year.Signatureof witness: 1.Name: _________________________ Address _______________________Signatureof witness: 2Name: _________________________ Address _______________________