Estate Planning Concepts, Will, Trust

An estate plan is an arrangement for the use, conservation and transfer of one’s wealth. The process involves the creation of an estate, the growth of the estate to meet the needs of the owner and his or her family and the preservation and protection of the estate from unnecessary taxes and costs.

Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.

Estate planning is often a cooperative effort between you, your attorney, and other appropriate members of an estate planning team, such as a financial planner, a life insurance agent and a CPA. The plan should not be thought of as a series of separate transactions but, rather, as an ongoing process that evolves as your needs, goals and family change, as laws change, and as new estate planning tools and techniques are developed. Proper planning requires professional thoroughness that respects the overall wellbeing of you and your family. Most importantly, however, it should be a plan that is carefully designed to meet your goals.

Estate planning goals should include the following:

• A business exit strategy if you have an ownership interest in a business.
• Preserving the assets of your estate by minimizing taxes and post death administrative costs not only in your estate, but also in the estates of your spouse and descendants
• Providing instructions for your care and the management of your assets for you and your family if you become incapacitated.
• Avoiding probate.
• Provisions for asset preservation if you or a family member require long term health care.
• Your control and best utilization of your assets during your life.
• A plan of distribution that will leave your assets to whom you want, when you want, and with whatever controls you want.

Estate planning tasks include the following:

• Limiting estate taxes by setting up trust accounts in the names of beneficiaries
• Establishing a guardian for living dependents
• Naming an executor of the estate to oversee the terms of the will
• Creating or updating beneficiaries on plans such as life insurance.
• Setting up funeral arrangements
• Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
• Setting up a durable power of attorney (POA) to direct other assets and investments

Will

Will is a type of legal document used to transfer the property of a person after death as per his/her wishes. The importance of Will cannot be stressed enough as lakhs of civil cases are pending before various Courts for resolving inheritance disputes. Further, all Wills are revocable at any time during the life of the person and is a confidential document. Hence, it is important for everyone to know about the benefits of having a Will and create a Will

Types of Will

Privileged Will

Privileged Wills are Wills that may be in writing or made by word of mouth by those in active services like a soldier, airman or mariner. The legal requirement for the validity of a privileged Will has been reduced to enable certain persons to quickly make a Will. The following conditions are applicable for a privileged Will:

• The testator writes the whole will with his own hand. In such a case, it need not be signed or attested.
• If a soldier or airman or mariner has given written or verbal instruction for the preparation of a Will but has died before it could be prepared and executed. And such will is a valid Will.
• The testator should sign the privileged Will written wholly or in part by another person. In such a case, there is no requirement for attestation.
• A Will written wholly or partly by another person and not signed by the testator is a valid Will if it is proved that it was written by the testator’s directions or that the testator recognized it as his/her Will.
• A half-completed privileged Will is also considered valid if it is proved that non-execution was due to some other reason and does not appear to be an abandonment of intentions to create a Will.
• A privileged Will can be made by word of mouth by declaring intentions.

Unprivileged Will

Will created by a person who is not a soldier employed in an expedition or engaged in actual warfare or a mariner at sea is known as an unprivileged Will. For an unprivileged Will to be valid, it must satisfy the following conditions:

• The person creating the Will must sign or affix his/her mark to the Will. Else, some other person should sign as per the directions of the testator (Person creating the Will) in his/her presence.
• The two or more witnesses should attest to the will. The witnesses must have seen the testator sign or affix his mark to the Will or has seen some other people sign the Will, in the presence and by the direction of the testator.
• The signature or mark of the testator or the signature of the person signing for the testator must be placed so that it appears that it was intended to give effect to the writing as Will.

Conditional or Contingent Wills

A Will can be expressed to take effect only in the event of satisfying certain conditions or can be contingent upon other factors. Such a Will, which is valid only in the event of the happening of some contingency or condition, and if the contingency does not happen or the condition fails, is called a conditional or contingent Will.

Concurrent Wills

Concurrent Wills are written by one person wherein two or more Wills provide instructions for disposal of property for the sake of convenience. For instance, one Will could deal with the disposal of all immovable property whereas another Will deals with the disposal of all movable property.

Joint Wills

Joint Will is a type of Will wherein two or more persons agree to make a conjoint Will. If a Joint Will intends to take effect after the death of both persons, then it would not be enforceable during the life-time of either. The person at any time during the joint lives or after the death of one can revoke the joint will.

Duplicate Wills

The testator will create a duplicate will for the sake of safety or safekeeping with a bank or executor or trustee. However, if the testator destroys the Will in his/her custody, then the other Will is also considered revoked.

Holograph Wills

Wills which are handwritten by the testator himself are known as Holographic Wills. These kinds of will have their own merit. Due to the fact that they are completely handwritten by the testator himself, raises a strong presumption9 pertaining to their regularity and execution. It is held in various judicial pronouncements that “If there is hardly any suspicious circumstances attached to the will, it will require “very little” evidence to prove due execution and attestation of such a will”

Requirements of a Valid Will

Testator Details: Name, age, address details of the person making the Will

Legal declaration: A Will is a declaration. A Will is by which a living person (called testator) declares his desires or intentions. A Will is never an agreement or contract or settlement. It is for this reason that the beneficiaries of a Will should not be parties to the Will. The declaration must be legal. A declaration that is illegal either by way of the ultimate objective or in some other way will not be considered as a Will.

Intention of testator: A Will is a declaration of intention of the person making the Will. By definition, intention relates to the future and is different from statement of narration of facts as at present. A Will that only narrates the present state of affairs and does not carry a clear exposition of the intention of the testator is not a Will. Similarly, if a Will made by a wife stating what her deceased husband always desired before death is not a Will; since it carries intentions of the testator’s deceased husband and not of the testator.

With respect to his / her property: A Will can only be made with respect to the property that the testator owns or has rights over. The simple rule is that one can only give what one has. There is no way that one can give away something that one does not have.

The details of the properties which the testator wants to give to his beneficiaries under his Will like the description, the registration number, the date of registration and whether it is his self acquired property etc. If it is a movable property, then the details and description of each should be clearly and individually mentioned.

Beneficiary Details: In case of multiple beneficiaries, the details of each beneficiary like name, age, address, relationship of the beneficiary with the Testator.

Desires to be carried into effect after his / her death: The Will must state clearly that the testator desires that it comes into effect after his / her death. A renunciation during one’s lifetime does not amount to a Will. If the document desires to partition property among the testator’s sons while the testator is still living, the document cannot be called a Will.

Guardian for Minors: If the Testator wishes to give his property to any beneficiary who is a minor, then definitely he should appoint a guardian who will take care of the minor’s property till the minor attains majority.

Executor of the Will: The Testator should appoint an Executor to his Will. An Executor is a person who shall implement the Will after the Testator’s death.

Signature and Date: The Will should be clearly dated and signed by the Testator at the place in the document just below the last sentence in the document.

Exclusions: The Testator cannot give any property that is joint family property or ancestral property that is common to many other members too. Such a Will becomes void.

Trust

A trust can be created by not just the high –networth individuals but even by ordinary men and women. The provisions of the Indian Trust Act, 1882 (referred to as “The Act” in this article) governs only private trusts.

Public Trusts are usually governed by state-specific legislation. Eg: The Maharashtra Public Trust Act, 1950. The Indian Trust Act extends to the whole of India except the state of Jammu and Kashmir and Andaman and Nicobar Islands. Further, this act is not applicable to the Waqf, religious or charitable endowments and to a few others.

Parties in a Trust

• Author/Settlor/Trustor/Donor (Mr X): The person who wants to transfer his property and reposes confidence on another for the creation of the trust.
• Trustee (Mr Y): The person who accepts the confidence for the creation of the trust
• Beneficiary (Mr X’s granddaughter): The person who will benefit from the trust in the near future.

A trust may be created by:

• Every person who is competent to contracts: This includes an individual, AOP, HUF, company, etc.
• If a trust is to be created by on or behalf of a minor, then the permission of a Principal Civil Court of original jurisdiction is required.

Types of Trusts

• Private Trusts: A private trust is for a closed group. In other words, the beneficiaries can be identified. eg: A trust created for the relatives and friends of the author.
• Public Trusts: A public trust is created for a large group, i.e., the public in large. eg: Non-Profit NGO’s Charitable Institutions for the general public.