INTRODUCTION
Having worked hard at creating wealth during one's lifetime, it is equally important that you decide what happens to your accumulated wealth after you are gone. For this, you need to have a wealth succession plan in place. What is the best way to do this? The smoothest way is to leave behind a will to ensure that the final allocation of your wealth happens according to your wishes.
WHAT IS A WILL?
A will is a legal document that names the individual/individuals who would receive the property and possessions of a person after his/her death. Any person with a sound mind and who is not a minor can bequeath his/her property with the help of a will.The document can be revoked, modified or substituted by the person executing it at any point during his/her lifetime.
IMPORTANCE OF WILL PLANNING
If a person dies intestate (without making a will) ,his/her assets will be divided and distributed according to the succession laws, which are based on the religion of the deceased person. In the absence of a will, the legal heirs would have to incur substantial expenses to acquire mandatory documents like a succession certificate or letter of administration, in order to transfer titles, cash investments, assets or properties, apart from the prohibitive legal fees involved. A succession certificate is required in the case of movable properties, while the letter of administration is needed in the case of immovable property.
Will planning is important because the document always acts as an inventory of the assets left behind by the deceased. A will also helps in avoiding any conflict among the natural heirs.Moreover, if a person wants to distribute his/her wealth to anybody other than the natural heirs, the will assumes paramount importance
TYPES OF WILLS
There are two types of wills - Privileged Will and Unprivileged Will.
A Privileged Will is an informal will which can be made either in writing or also by an oral declaration and at short notice by individuals who are about to put their life at risk, such as soldiers , airmen or sea mariners engaged in warfare.
All other wills are called Unprivileged Wills which require formalities to be followed.
REGISTERING THE WILL
You can make your will on your own on a piece of paper ensuring that all the important details and requirements are in place, to avoid any dispute. There are several templates available online, which can serve as a guide to drafting the will by yourself. Since no stamp duty is payable on a will, it need not be written on stamp paper. However, if you have several assets that require clarity, or if your estate is worth a lot of money, it is best to hire the services of a lawyer who will be able to draft your will clearly, avoiding ambiguities that can result in legal battles.
In India, registering of wills is not compulsory, even if it relates to immovable property.However, registering a will can put an end to any doubts about its authenticity.
A will can be registered with the Registrar / Sub- Registrar at a nominal registration fee. Once a will is registered, the sealed envelope containing the will and superscribed with the name of the testator (the person making the will) or his agent, is placed in the safe custody of the Registrar and cannot be tampered with, destroyed, mutilated or stolen.
REQUIRED FORMALITIES FOR AN UNPRIVILEGED WILL
1) The signature or mark of the testator is necessary for an unprivileged will. Although in certain situations, the will may be signed by some other person in the presence of the testator, it is always advisable to have a will signed by the testator, in order to avoid any dispute later.
2) Every unprivileged will should be attested by atleast two witnesses who have seen the testator or his agent sign it, and who should sign the will in the presence of the testator.For a will to be valid, the beneficiary under a will should not be a witness.
3) Apart from the testator and the beneficiaries, a will should also have an Executor who is entrusted with the responsibility of transferring the property as desired by the testator.The executor can be any person who is not a beneficiary in the will. If there is no executor for a will, the court will appoint one.
4) It is important for the will to include the following three declarations -
a) that you are revoking all earlier wills
b) that you are of sound mind
c) that you are not making the will under any pressure.
SOME OTHER USEFUL POINTS TO KEEP IN MIND
1) Make your will as specific as possible. If any detail is not precise or you get it wrong, the will can be easily contested in court.
a) List all assets in detail - mention bank account number(s), locker number, and details of property, both movable and immovable.
Specify PAN Number in the case of mutual fund investments, since all mutual fund folios are linked to the PAN Number.
b) In the case of beneficiaries, mention the full name, your relationship with the person, and the assets you want to give. Moreover, identify each beneficiary with their Aadhar number, PAN Number or OCI number (in the case of NRIs)
CODICIL
If there is any alteration in the status of assets or heirs, such as sale of existing assets or purchase of new assets, these changes can be incorporated in the original will through a Codicil.
In India, a codicil is an addition to your original will, which basically states what items of your will you are changing. For it to be valid, you will have to follow the same procedures as when you created the original will.
However, if you are making substantial changes to your will, it would be advisable to draft a new will, including a declaration that it is your final will and revoking all previous wills and codicils.
As per law, the last drawn will is considered, whether registered or not.
GIFT DEED
A gift deed is a document that records the act of giving a gift and is executed between the Donor (the person giving the gift) and the Donee (the person receiving the gift). It takes effect during the lifetime of the donor. A gift can be movable or immovable property that is transferable and tangible. Gifts that involve immovable property should be registered under the Indian Registration Act. Stamp duty is payable based on the value of the gift, ascertained by approved valuation experts. Gifts made to relatives as defined by the Income Tax Act are exempt from tax in the hands of the donee.
WILL vs GIFT DEED
1) A gift deed operates as soon as it is executed and the asset(s) gifted will vest in the donee during the lifetime of the donor. On the other hand, a will is operative only on the death of the testator. Therefore, properties bequeathed through a will can vest in the beneficiaries only after the death of the testator.
2) A will, whether registered or not, can be revoked during the lifetime of the testator. On the other hand, a gift deed, once executed, is irrevocable.
3) A will does not require to be stamped or registered, but a gift deed requires to be stamped as per applicable stamp laws.
The Supreme Court ruling in March 2018 now allows for the creation of a Living Will which sets out a person's wishes on how they want to be treated if they are seriously ill and and become unable to communicate their decisions. More on this in my next post.
Having worked hard at creating wealth during one's lifetime, it is equally important that you decide what happens to your accumulated wealth after you are gone. For this, you need to have a wealth succession plan in place. What is the best way to do this? The smoothest way is to leave behind a will to ensure that the final allocation of your wealth happens according to your wishes.
WHAT IS A WILL?
A will is a legal document that names the individual/individuals who would receive the property and possessions of a person after his/her death. Any person with a sound mind and who is not a minor can bequeath his/her property with the help of a will.The document can be revoked, modified or substituted by the person executing it at any point during his/her lifetime.
IMPORTANCE OF WILL PLANNING
If a person dies intestate (without making a will) ,his/her assets will be divided and distributed according to the succession laws, which are based on the religion of the deceased person. In the absence of a will, the legal heirs would have to incur substantial expenses to acquire mandatory documents like a succession certificate or letter of administration, in order to transfer titles, cash investments, assets or properties, apart from the prohibitive legal fees involved. A succession certificate is required in the case of movable properties, while the letter of administration is needed in the case of immovable property.
Will planning is important because the document always acts as an inventory of the assets left behind by the deceased. A will also helps in avoiding any conflict among the natural heirs.Moreover, if a person wants to distribute his/her wealth to anybody other than the natural heirs, the will assumes paramount importance
TYPES OF WILLS
There are two types of wills - Privileged Will and Unprivileged Will.
A Privileged Will is an informal will which can be made either in writing or also by an oral declaration and at short notice by individuals who are about to put their life at risk, such as soldiers , airmen or sea mariners engaged in warfare.
All other wills are called Unprivileged Wills which require formalities to be followed.
REGISTERING THE WILL
You can make your will on your own on a piece of paper ensuring that all the important details and requirements are in place, to avoid any dispute. There are several templates available online, which can serve as a guide to drafting the will by yourself. Since no stamp duty is payable on a will, it need not be written on stamp paper. However, if you have several assets that require clarity, or if your estate is worth a lot of money, it is best to hire the services of a lawyer who will be able to draft your will clearly, avoiding ambiguities that can result in legal battles.
In India, registering of wills is not compulsory, even if it relates to immovable property.However, registering a will can put an end to any doubts about its authenticity.
A will can be registered with the Registrar / Sub- Registrar at a nominal registration fee. Once a will is registered, the sealed envelope containing the will and superscribed with the name of the testator (the person making the will) or his agent, is placed in the safe custody of the Registrar and cannot be tampered with, destroyed, mutilated or stolen.
REQUIRED FORMALITIES FOR AN UNPRIVILEGED WILL
1) The signature or mark of the testator is necessary for an unprivileged will. Although in certain situations, the will may be signed by some other person in the presence of the testator, it is always advisable to have a will signed by the testator, in order to avoid any dispute later.
2) Every unprivileged will should be attested by atleast two witnesses who have seen the testator or his agent sign it, and who should sign the will in the presence of the testator.For a will to be valid, the beneficiary under a will should not be a witness.
3) Apart from the testator and the beneficiaries, a will should also have an Executor who is entrusted with the responsibility of transferring the property as desired by the testator.The executor can be any person who is not a beneficiary in the will. If there is no executor for a will, the court will appoint one.
4) It is important for the will to include the following three declarations -
a) that you are revoking all earlier wills
b) that you are of sound mind
c) that you are not making the will under any pressure.
SOME OTHER USEFUL POINTS TO KEEP IN MIND
1) Make your will as specific as possible. If any detail is not precise or you get it wrong, the will can be easily contested in court.
a) List all assets in detail - mention bank account number(s), locker number, and details of property, both movable and immovable.
Specify PAN Number in the case of mutual fund investments, since all mutual fund folios are linked to the PAN Number.
b) In the case of beneficiaries, mention the full name, your relationship with the person, and the assets you want to give. Moreover, identify each beneficiary with their Aadhar number, PAN Number or OCI number (in the case of NRIs)
CODICIL
If there is any alteration in the status of assets or heirs, such as sale of existing assets or purchase of new assets, these changes can be incorporated in the original will through a Codicil.
In India, a codicil is an addition to your original will, which basically states what items of your will you are changing. For it to be valid, you will have to follow the same procedures as when you created the original will.
However, if you are making substantial changes to your will, it would be advisable to draft a new will, including a declaration that it is your final will and revoking all previous wills and codicils.
As per law, the last drawn will is considered, whether registered or not.
GIFT DEED
A gift deed is a document that records the act of giving a gift and is executed between the Donor (the person giving the gift) and the Donee (the person receiving the gift). It takes effect during the lifetime of the donor. A gift can be movable or immovable property that is transferable and tangible. Gifts that involve immovable property should be registered under the Indian Registration Act. Stamp duty is payable based on the value of the gift, ascertained by approved valuation experts. Gifts made to relatives as defined by the Income Tax Act are exempt from tax in the hands of the donee.
WILL vs GIFT DEED
1) A gift deed operates as soon as it is executed and the asset(s) gifted will vest in the donee during the lifetime of the donor. On the other hand, a will is operative only on the death of the testator. Therefore, properties bequeathed through a will can vest in the beneficiaries only after the death of the testator.
2) A will, whether registered or not, can be revoked during the lifetime of the testator. On the other hand, a gift deed, once executed, is irrevocable.
3) A will does not require to be stamped or registered, but a gift deed requires to be stamped as per applicable stamp laws.
The Supreme Court ruling in March 2018 now allows for the creation of a Living Will which sets out a person's wishes on how they want to be treated if they are seriously ill and and become unable to communicate their decisions. More on this in my next post.
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