What you need to know about a will

Mint 9/6/2010

All’s well that ends well. And for that to happen, all you need is sound planning. But more often than not, the wealth accumulated over a lifetime gets locked in litigation after death. In fact, we as a nation have witnessed many high-profile family feuds due to lack of a will, yet it is difficult to convince people to plan for after their time.

Says Jaydeep Kashikar, director, Brain Point Investment Centre Pvt. Ltd., a financial planning firm, “We all like to take life for granted, postpone the thought of death and keep succession planning for a later date. I give the example of Dhirubhai Ambani to my clients and tell them that it is best to create a will to avoid unnecessary feuds in the family.”

Why a will

Succession planning assumes importance when the value of the assets at stake is high. “When the amount is small, it is usually not a problem but as the value of the assets increases, the chances of dispute and litigation also increases,” says Adrish Ghosh, head (wealth advisory), Barclay’s Wealth India, a wealth advisory firm.

Says Suresh Sadagopan, certified financial planner, Ladder7 Financial Advisories, “Earlier, the perception was that only high networth individuals go for wills. But, now more and more middle- and upper middle-class individuals, too, are opting for it to avoid family strife later. Also, apart from assets with a financial worth, those with an emotional value attached to them also figure in wills.”

Moreover, you may want your money to be used by certain individuals when you are not around. Says Kashikar: “Every individual has certain desires on how his wealth and assets should be distributed to his loved ones after his death. You can do so through a will.”

How to make a will

Creating a will is simple. Says Anju Gandhi, partner, SN Gupta and Co., a law firm, “It can be as simple as noting down on a paper who you want your assets to be passed on to. It could simply be a record of how and in what proportion you want your assets to be distributed to the beneficiaries after you.”

But there are certain things you need to bear in mind when creating a will. For instance, the will has to be hand-written and both you and the two witnesses should sign each page. It is a good practice to mention the number of pages. In case you are revising a will, it is advisable to mention the details in the previous will and declare them null and void to leave no room for ambiguity. Don’t forget to destroy the old wills, if any. Also, ensure that the executor is neutral and has no personal interest in the matter.

Another piece of advice from Gandhi, “Always have a miscellaneous clause in your will. This means that mention who will get any asset you may have forgotten to list in the will or acquired after the will was created. This will not leave any room for arguments with regards to residuary assets.”

Validity of a will

A popular notion is that a will should be registered to lend it authenticity, but an unregistered will is also perfectly valid.

“People feel more secure if the will is registered as they believe it feels more credible and the authenticity cannot be questioned that way,” says Ghosh.

In fact, in case of multiple wills, the latest will is considered valid, if created correctly, even if it is unregistered. Earlier wills that are registered are not valid in this case.

A will can be registered with the sub-registrar of the concerned area. Usually, people register the will through a lawyer or a trust and nominates them as the the custodian and executor of the will.

How to execute a will

A will can be executed only after going through a probate. In case of a simple will, to which nobody has raised any objections, a probate is not compulsory in all states in India. However, if a probate is compulsory, the will is first published in a leading local daily. Any objection to the will has to be conveyed by the dissenting party to the court within the stipulated time. If there is no objection, then the court certifies the will, determines the beneficiaries and directs the distribution of assets. The process takes a minimum of six months.

When you need a trust

Succession planning can also be done through a trust. A trust may be created when the beneficiary is incapable of taking care of himself/herself, would need a regular stream of income for his/her sustenance or if the ownership and control of a family business has to be handed over to the next generation. “If a family business is divided between two or more siblings, the management and day-to-day decision-making can get complicated,” says Ghosh.

Gandhi recommends her clients to create a trust in case they have minor children or disabled dependants. The trust ensures that the trustee(s) you can rely on manages the assets and your dependants are taken care of. Gandhi adds, “So, in case of a minor, you can unlock a specific proportion of assets every year for the child’s education, and a certain proportion for the child’s higher education and marriage.”

Since a trust deed can be worded the way you want it, you have the freedom to regulate who gets what, when and in what proportion. You can also specify when the trust is to be dissolved. Unlike in a will, here the beneficiary is not required to deal with any nitty-gritty and the trustee takes care of all that.

Says Ghosh, “Since there is no probate, you are assured that the assets can’t be locked or sealed due to any pending litigation in the court which could take around a year.”

Shortcomings: If you set aside your assets and create an irrevocable trust during your lifetime, the assets get locked and even in case of an emergency, you will not be able to use your own money. But there’s a way out. You can create a revocable trust by wording in accordingly.

A trust created for such purposes is a private trust and needs to have at least two trustees—the laws for its registration differ from state to state.

TESTATOR: A person who creates the will

INTESTATE: A person who dies without creating a valid will.

EXECUTOR: A person who is chosen by the testator to ensure that the directions in the will are carried out as per his/her wishes

BENEFICIARY: A person who stands to gain from the will or the trust.

NOMINEE: The caretaker of the assets till an end beneficiary is determined.

TRUSTEE: An entity appointed by the testator as the caretaker/guardian of the assets.

PROBATE: A process by which a copy of the will is certified by the court and the assets distributed as per its directions.

ADMINISTRATOR: A person appointed by the court to administer the will when there is no executor.

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