“Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you.” —Shannon Alder
However, I have contradicting evidence to share.
In India, land/property disputes account for two-third (66.2%) of total civil cases. More than Rs.80, 000 crores of the money is lying unclaimed in Indian banks (over 6.41 crore unclaimed bank deposits), LIC PPF/EPF etc. Much of this situation arises when one dies without creating a succession plan, in simple words, without appointing a legal heir or heirs who will inherit the wealth.
What is Succession Planning? It refers to how a person wants his/her wealth and other possessions to be distributed after his/her demise. As rightly quoted by Dwight D Eisenhower ‘Plans are nothing. Planning is everything’.
In this article, we discuss various options that can help ensure one’s wealth passes to its rightful inheritor.
As the American writer, Ambrose Bierce once stated, ‘Death is not the end. There remains the litigation over the estate.’ So what are the consequences of dying intestate?
- Desired person may not get the wealth.
- Desired person may get partial wealth.
- May cost lot of money for legal heirs to claim your wealth.
- May cost lot of time for wealth to reach to the desired person.
Needless to say, it may lead to prolonged and bitter conflicts among the family members.
As per the news article published in Press Trust of India, only 15% of Indian family businesses have robust succession planning. Since that’s the scenario in business families, it’s no surprise that over 66% of total civil cases in the country are filed against land and property disputes.
Here’s how one can avoid these situations.
Joint Accounts: A joint account functions exactly like an individual account, except that there are two or more people who own the account. You can have a joint mode of holdings in the Saving bank account, Mutual funds, Fixed deposits, Demat account, Real Estate, NSC, etc. It’s the hassle-free and cheapest way for the other account holder to get control over the accounts or investments. It has also proven very useful in situations when one of the account holders is alive but can’t act or take decisions due to situations such as disability or in a coma.
Nomination: By definition, ‘Nomination is the right conferred upon the holder of an investment product to appoint the person entitled to receive the money in case of the death.’ A nominee can be an individual, company, or trust, depending on the terms of investment or asset. One can appoint multiple nominees with a percentage of interest defined for each nominee. But one should remember that legally, nominees are only caretakers of the deceased’s assets, but not owners and in case of legal dispute, the court will pass the assets to legal heirs if the nominee is not the one. It’s also one of the hassle-free and cheapest ways of succession planning.
Will: This is a legally enforceable declaration (document) of how a person wants his/her assets distributed after death. One can prepare a valid will on their own, but it’s advisable to get it prepared by an attorney to avoid ambiguity in the wordings. Though the Indian Registration Act, 1908 provides for optional Registration of Will, getting it registered provides safety, validity, and security to a will in case the original copy is destroyed, although an unregistered will is also enforceable.
Trust: By definition, “A trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by owners, or declared and accepted by him, for the benefit of another or by another and the owner. Simply said, it is a fiduciary relationship wherein a person (the settlor) transfers property to another (trustee) who manages that property for the benefit of someone else (beneficiary). In comparison to Will, Trust tends to be more expensive to create, and to maintain. Trust is active the day you create it, however, a Will comes in force only after the death of the testator. A Trust will streamline your estate’s transfer, unlike a will, which goes through probate.
While having a Will in place is a must, the creation of a Trust is advisable depending on specific needs (for example if the beneficiaries are of a young age, are vulnerable, are living with some sort of disability, or for family business continuity) of an individual.
Much of the hassle that a family goes through can be avoided after the demise of the bread earner by simply having a second holder in all important accounts and investments or by having proper nominations. One can do an assessment of assets and decide between a ‘Will’ or a ‘Trust’ based on his/her objectives. Due to ease in its preparation and lack of formalities required in making a will, it is a popular tool of succession planning that helps avoid bitter family feuds after the passing of a family member.
