I have spent long time in advising my Indian and NRI clients on Estate Planning in India. In the last almost one year of my Entrepreneurial journey I had met lot of NRI clients who are still not aware on the importance of Estate Planning for their Assets in clients. So I thought share some general information on the various aspects of Estate Planning in India through series posts over the coming weeks. I will like to share that these are my personal views and all should consult their legal adviser before doing anything. In my first post I will like to share my views on Will and its importance. Hope you all like my views:
What are different modes of Devolution of Assets?
Transfer of assets from one generation to next generation can happen in following ways:
- Gift during one’s lifetime
- Through a Will
- Application of Law (if one dies without a Will)
- Through a Trust (Living Trust)
What is a Gift? Who can make it?
One can gift any asset to the person he/she chooses to. There is No gift Tax in India and no limit for a gift to any person covered under the definition of Relative in Indian Income Tax Act. For any other person who is receiving the gift it will be treated as the income of that year and it will be taxed at the applicable tax rate.
However, for real estate although there is no gift Tax but there will be stamp duty implications for transfer of “Title” of the property in question.
Will helps in smooth inheritance and prevents the family from undergoing avoidable hardship and hassle in inheriting the assets.
No one would like to gift their all assets during their lifetime to their children or Legal Heirs, hence it is important to draft one’s “Will”
What is a “Will”? “Will” is a legal document by which a person, the “Testator”, expresses his or her wishes as to how his or her property is to be distributed at the time of his death. Will is one of the simplest instruments used for transmission of assets from one generation to next generation.
Person dies interstate (one dies without a Will)? If a person dies without a Will then the legal heirs of the person has to approach a District Court for getting a Succession Certificate. Once they obtain a Succession Certificate then they can get the assets transferred in their name.
Trusts: One can set up a Private Trust and can transfer the assets into the Trust during their lifetime. The family members can become the beneficiary or Trustee or both and can enjoy the benefits of the assets in the Trust. They can enjoy the benefit either in the form of Income or getting distribution of capital at the time intervals or on specific events as per the Trust Deed.