How Women Should Go About Estate Planning.

[Women and Financial Planning Series]

Session 6: Estate Planning For Women

We are glad to have you with us for our 6th Session of Women & Financial Planning series– and that is…

Estate Planning For Women

Benjamin Franklin, a renowned polymath, who was a leading author, political theorist, civic activist, statesman and diplomat, once said, “ this world nothing can be said to be certain, except death and taxes.

Yet most people avoid thinking about estate planning. “Why do I need it so early in my life?” is a question raised by most individuals. “It is for those who have crossed their prime” is the lore one lives with. 

Also, they don’t realise that there’s more to estate planning than just a Will. Philanthropy and charity could also form an important part of the Will.

Married women with dependent parents ought to understand the nuances of estate planning so as to make informed decisions to ensure financial security, wellbeing of their dependents or loved ones.

You see, dying intestate (i.e. without preparing a will) can lead to various complications and disagreements amongst your loved ones / your heirs. And hence, you should pragmatically think about ‘estate planning’.

Remember, estate planning is not only for the wealthy, or those who’re nearing retirement…neither it is for only the men to handle. The fact is it’s everybody in today’s world.

So, in this session we’ll discuss how woman should go about estate planning…

First let's understand…

What is Estate Planning?

Estate planning in simple terms refers to the passing assets / investments down from one generation to another. You decide how much of your estate – be it property(s), car(s), personal accolades, financial investments, etc. – you want to pass on to whom and how, after your demise.

Estate planning is a dynamic process. It needs to be reviewed at regular intervals to absorb any changes that may happen in your life or in the laws of the country.

Let's come to the merits…
Why Estate Planning?

  • In a ruthless and materialistic world we live in today, many are unfortunately greedy, wanting to grab a piece of your pie. With a prudent estate planning you can avoid the serious disputes amongst family members/ children/ siblings over your estate.

  • During your old age or some-times even earlier in life, you may be incapacitated to think. Your loved ones / heirs may also face such a syndrome. Hence, if you engage in estate planning earlier, it can keep you prepared to handle such contingencies.

  • Life is quite unpredictable and hence you should begin at preferably in the mid-asset accumulation phase i.e. between 35 to 45 Years or latest in the protection phase of your life cycle when you are between 45 to 55 Years. Estate planning is one of the most essential aspects of our lives and should not be put off until it's too late. You don't need to wait till you own plenty of assets / investments, or till your retirement for estate planning. It is advisable to prepare your Will early, once you have certainty about your assets and legal heirs to whom you would like to pass on your wealth.

  • Estate planning ensures that your physical assets and financial assets i.e. your investments, are inherited by the people to whom you want them to be bequeathed after your demise. The law might not take into account your personal relationships or preferences while distributing your assets if you die intestate (i.e. dying without a Will). Without proper planning, it is possible that the law disposes your estate even among distant relatives who might not be your first choice of beneficiaries. 

  • It also avoids complications, disagreement, bitterness and drift in the family 

  • Prevents financial, emotional and legal grief to your loved ones when they are already in pain over the death of their dear one.

  • If estate planning is done prudently, it can even help reduce your tax outgo. For instance, instead of passing on assets after your death, you might gift them to your loved ones while you are alive. If left to the prevailing intestacy rules, there is a chance that a higher amount of tax may be applicable on your property and other assets. Besides, you can also make separate provisions for tax payment. For example, you can provide for tax liabilities separately from your residuary estate, if you don't want to reduce the inheritance value of assets by way of taxes.

Ways to go about estate planning…

There are various ways you can carry out estate planning. But broadly there are two: Wills and Trust.
  1. Wills – Wills are the cornerstone of all estate plans. Therefore a Will needs to be judiciously drafted. This will help you as a testator to make a valid Will and even enhance your understanding of your current financial strength and an opportunity to improve upon it in your remaining life span.  

Here are…

Points to note while writing a Will
  • You ought to be 18 years of age and above and of sound mind to write a legit Will

  • The Will should be free from coercion, fraud and undue influence

  • A Will should have the title “Last Will And Testament Of (state your name here)” to make it clear that the document is your Will. 

  •  State your full name, current address, and the fact that you are of sound mental health and under no duress from any one to make the Will. It is necessary to bring in clarity that the Will is prepared in complete sense.

  • Even though it is not necessary, it is advisable to state the name of the executor i.e. the person who will carry through the principles of the Will. You can name your spouse or the main beneficiary. If you are nominating an outside person to be the executor of your Will, you must ask their permission first. If you have minor children, you must also indicate a guardian for them in your absence.  

  • A will can be hand written or typed out. No stamp paper is necessary. You can write a Will on a simple A4 size paper, sign and date it with minimum 2 witnesses and keep it in a secure location.

  • Don’t forget to date your Will. A Will without date is not maintainable. If you have more than one Will, the one having the latest date will nullify all other Wills.

  • Ensure that the Will is Simple, Precise and Clear, otherwise there may be problems for the legal heirs. It is always better to take the advice of a trusted advocate or an estate planner when writing your Will.  

  • It’s not compulsory that you register your Will. But if you wish to give any property or asset to any charitable organisation, then registration should be done. Likewise, in order to avoid frauds and tampering, it is preferable to get the Will registered. 

  • It is possible to make changes or minor alterations in a Will if you wish to do so. However in case there are too many or major changes, it will be better to make an entirely new Will.

  • Each page of the Will should be serially numbered and signed by you, the testator and the witness (whom you evince trust). This is to prevent the Will being substituted, replaced, or pages being inserted by people intending to commit fraud. At the end of the Will you (the Testator) should indicate the total number of pages in the Will. Corrections if any should be countersigned. 

  • If you bequeath assets to your minor children make sure you appoint a guardian for the assets till the time the said minors reach an adult age.

  • Don’t forget that while writing a Will, laws of the country, your religion also play an important role.  

Remember, that your Will is one of the most important documents you’ll create – detailing the distribution of the wealth to your loved ones. So, ensure that it’s done correctly.  

Should you consider writing a Will online?

  • If you have a simple, small family – husband, wife, one child – and you are not controlling any business enterprise but earning a salary and wealth through the same; you can consider making a Will online. But ensure that there aren’t complexities involved at the domestic front.

  • Most online Will writing portals are backed by legal services firms

  • Writing a Will online is cost-effective

  • You also have the provision to revise the Will online

Besides a Will, you can also create a Trust to transfer assets to your beneficiaries…
  1. Trust – A trust is an agreement between the ‘settlor’ and the ‘trustees’ to transfer the legal ownership of assets / property to the trustee with the obligation that the same should be held for the benefit of the ‘beneficiaries’ as specified in the trust deed.

A trust has basic 4 components:
  • Settlor – Also known as the author of the trust; he’s the one who settles the Trust

  • Trustee – One who administers the trust and is appointed by the settlor

  • Beneficiaries – They’re the ones for whose benefit the trust is created

  • Trust property or trust money – Which is the subject matter of the trust, comprising of both moveable and immoveable property

A trust should ideally be complimented by a Will.

Trust can help you decide how and when your beneficiaries must receive their inheritance. Creating a Trust is largely useful in the case where your spouse and minor children are unable to manage their finances on their own. But overseeing a Trust is critical aspect.

Don’t live by a fallacy that mere nomination is enough…

Why a mere nomination is not enough

  • Nominees are not necessarily your legal heir. They are trustees of your assets.

  • Nominees aren’t always the owner of your assets

  • The owner of the asset will be the legal heirs as per the Will, or if you die intestate (i.e. in the absence of a Will) the transmission would be as per the country's succession laws.

  • Thus if you wish to pass your mutual fund holdings to your loved ones, ensure they’re not just nominees, but beneficiaries as pronounced in the Will. Remember, the nominee(s) registered under the nomination facility provided by a Mutual Fund does not necessarily acquire any title or beneficial interest in the Units. The nominee(s) receives the Units only as a trustee for the legal heirs or legatees. The Mutual Fund house is not bound to transmit the Units in favour of the nominee in the event of any dispute in relation to the nominee's entitlement to the Units. 

Take services of a trusted lawyer / estate planner

If you aren’t confident about doing estate planning on your own, don’t hesitate to reach out to an estate planner or a trusted lawyer.

Qualities of a good estate planner cannot be judged in a single meeting, but over several meetings. But he needs to be: righteous, highly proficient, approachable, and have the ability to comprehend your, the testator’s needs

Moreover, you too need to deeply engage with the estate planner, asking pertinent questions.

Before we wrap our today’s learning session, here are a few vital…

Points to Remember…

  • Estate planning should not be thought just before or after retirement. Life is quite unpredictable and hence the earlier you think through and plan, the better it is.

  • Don’t live under a notion that your legal heir will handle it maturely. Unfortunately often many disputes happen over money in today's materialistic world. 

  • The nominee(s) registered under the nomination facility provided by a Mutual Fund does not necessarily acquire any title or beneficial interest in the Units. The nominee(s) receives the Units only as a trustee for the legal heirs or legatees. The Mutual Fund is not bound to transmit the Units in favour of the nominee in the event of any dispute in relation to the nominee's entitlement to the Units. 

  • Seek views of a trusted lawyer or an estate planner while you think of estate planning

  • A Will is a cornerstone of estate planning, and hence needs to be drafted judiciously

  • Even a Trust should ideally be complimented by a Will

  • An Estate plan ensures that your physical assets and financial assets i.e. your investments, are inherited by the people to whom you want them to be transferred to after your demise
    (And last but not the least)

  • Remember, estate planning is not only for the wealthy. It’s for everyone irrespective of the quantum of wealth you own and the economic strata you come from.

So to end our learning exercise today, we now invite you to test your learning by taking up this simple quiz (and win exciting prizes!)

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