Modern India has evolved a lot. The marked shift in the structure of our demographic, be it the gender distribution in the workforce, education access and entry of first-generation white collar workers, migration patterns out of India, the rate of savings, preferences of assets, financial inclusion, financial awareness, all point towards a new era. With these positive changes, come new challenges and complexities in matters of handling the wealth so created by such evolution. While estate planning and wealth transfer is an undeniably important part of any person’s financial/legal plan, it’s not always just complex documents, structures and laws.
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Here’s a quick reference list of different strategies that may be used today by the modern Indian:
Joint holding
Estate planning is not just about asset transfer but also effective and timely access to said assets in the event of the death or disability of the person. Having joint holding facilitates transactions, easy access, actions like updation of details, etc and prevents assets from being stuck in limbo.
Nomination
The good old nomination facility is always the first and foremost weapon available in the artillery of estate planning. While absolutely essential, it comes with some limitations including the fact that for most types of assets, the nominee is not the ultimate beneficiary but just the interim custodian of the asset till the legal heirs are determined and proved. So, the nomination is a must, but only a nomination may not be enough.
Segregation of investments
Some of the simplest estate planning strategies may include creating a separate bank account, demat account, MF folio, etc for specific beneficiaries or goals. A lot of disputes over inheritance happen over lack of clarity, not lack of money, emotion or respect.
Power of attorney
There are times when a person is still alive, but unfortunately due to age, illness, injury, etc the person is unable to undertake action, transactions, lucid decisions, etc. Especially in the case of such a person being the breadwinner of the family, the hardships the family can undergo are unimaginable. Executing a conditional power of attorney can ensure that in such an event, the assets are not inaccessible and actions can be taken.
Wills
Often painted as a document that people are wary of, this is one of the most important pieces of estate planning documents to exist. This document empowers a person to decide what happens to their assets and estate after their demise. Right from the distribution of assets to securing the future, to ensuring income, and appointing guardians, the power of a will is often underestimated. In the absence of a will, the person’s estate is treated as per the personal law applicable to their religion. This takes the power to deal with your assets out of your hands. Wills are not always complex and expensive to make. It can be if needed, but it doesn’t have to be. Don’t let this be a deterrent.
Trusts
In cases where the intended beneficiaries of your assets are incapable, unavailable or not equipped enough to handle them, or in cases where there are a lot of beneficiaries, demanding a governance model for the assets, or cases where the estate and beneficiaries require a proper structure of inheritance and income generation, creation of a vehicle called trust, appointing trustees to monitor and run the trust and transferring your assets to the said trust is a very effective option. There are different reasons why trust may be needed, but not everyone needs trust. Things to keep in mind include costs, intent, taxation, legal formalities, long-term plans, etc.
There is no one-size-fits-all when it comes to estate planning. Each family comes with different needs and requires a different approach. Some may be very simple while some more elaborate. While there’s no better way to plan it rather than to start thinking and talking about it, there is no better time to do so than now!
