Estate Planning & Succession Series
Series 1 | Article 2
The general notion is that estate planning is for those with substantial and multiple assets. However, estate planning is putting in motion the how and when a person’s assets are transferred to their loved ones or legal heirs legally and effectively, irrespective of the size of the estate or the spread across asset classes. As mentioned in my previous article, estate planning may be looked at as you would insurance - different needs for different people.
Estate and succession planning has a broader scope and can help you meet various objectives, such as; parking your wealth for medical or financial emergencies, appointing a guardian in case of a minor child, making provisions for dependents, avoiding potential disputes amongst your loved ones or legal heirs, and so on. Therefore, depending on your specific circumstances and family dynamics, your wishes, and the law's requirements, you may choose either one or multiple modes of planning your estate and generally succession to your estate by your loved ones and legal heirs.
General Modes of Estate Planning
1. Will - A 'Will' is a document whereby you declare your intentions, for the distribution of your assets and liabilities, upon your death. A Will is a testamentary document and will take effect only after your death. Therefore, a Will prepared by you must be legally valid and appropriately drawn up to ensure that your wishes are capable of being administered after your death.
2. Trust - A private 'Trust' is a legal arrangement whereby a person or entity will hold the title of your assets, subject to an obligation to use the assets for the benefit of your loved ones or your legal heirs. A trust deed will be a testamentary document if it comes into operation after your death and a non-testamentary document if it comes into operation during your lifetime, depending on the effective date recorded in the trust deed. A trust deed must be carefully prepared and under legal advice in order to ensure:
that the lawful purpose of the trust can be achieved;
that the interest of the beneficiaries is protected; and
that the powers delegated to the trustee will allow them to carry out their obligations efficiently and effectively.
Other Modes
3. Gifts - A ‘Gift' is the act of transferring an asset voluntarily and without consideration to your loved one. While a Gift may not be a conventional mode of estate planning, unlike a Will or Trust, it can be the preferred mode for specific situations, such as, when it is out of love and affection, to avail the benefits of income tax exemptions and concessions on the stamp duty.
4. Partition - A 'Partition' generally occurs when a Karta of a Hindu Undivided Family (HUF) dies intestate. However, at the request or consensus of the coparceners of HUF, a HUF can be partitioned during the Karta’s lifetime as well. Such a partition takes place through the execution of a Partition Deed. A Partition Deed is a document executed between the coparceners and members of the HUF who divide the property held by the HUF amongst themselves, thereby making each coparcener an owner of their share in the property. A Partition may also take place in situations other than an HUF where two or more people jointly own property.
5. Family Settlement or Arrangement - A Family Settlement or Arrangement and a Partition Deed are similar in as much as they record the intention with respect to the division of property held jointly. However, there are several differences between the two. The primary difference is that a Partition Deed is compulsorily registrable. On the other hand, a Family Settlement or Arrangement, depending on the manner in which it is drafted, is compulsorily registrable only if the terms of the agreement are not merely a record of an oral arrangement but are recorded in writing, and the terms create or extinguish any rights in a property.
6. Relinquishment - A 'Relinquishment' is when you jointly own a property with your loved ones or the legal heirs and release your share in the property during your lifetime, in their favour, by executing a Relinquishment Deed or Release Deed.
In the following articles, I will deal with each of the modes of estate planning individually.
About the Author
Rashmi Shah has been with MZD Legal Consultancy since 2019 and has been practicing law since 2014. Rashmi is a part of the Estate Planning, Succession, and Real Estate practices at the firm. Rashmi also has an expertise in trade mark law and disputes. She can be contacted at rashmi@mzdlegal.in
About MZD Legal Consultancy
MZD Legal Consultancy is a boutique law firm in Mumbai, India. The firm was established in 2011 and comprises professionally qualified lawyers with varied levels of experience and expertise in specific practice areas. To know more, click here www.mzdlegal.in
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