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Estate planning: A necessity at all life stages and for income levels

moneycontrol, May 27, 2021

In the absence of a Will, intestacy laws will ascertain how your assets are passed on, which may go against the interests of your loved ones


Your loved ones will benefit immensely if you have an estate plan that is reflective of your life stage. Estate planning is not just for the super-rich; it’s suited to all income groups.

The point is simple: if you own assets and would like to pass them on, an estate plan is pertinent, irrespective of your age or the quantum of your wealth. In fact, the key is to understand what elements should be included in your estate plan, considering your current age and life circumstances. As your life evolves, so would your objectives. For instance, your priorities in your retirement stage would be vastly different from what they were when you began your career. Each phase in your life is unique, and so should your estate plan be.

Let us understand the estate planning strategies you should adopt if you are just beginning your life’s journey, or are mid-way or are approaching the golden years of your life.

Lifecycle of Estate Planning:

Early adulthood with limited assets
This life stage includes young and unmarried individuals with limited assets. Estate planning may not be a priority for you at this stage, as it would seem that you do not possess sufficient wealth to formulate such a plan. However, this is far from the truth.

If you have any assets, albeit minimal in nature, it is crucial that you consider Will-planning for yourself. In the absence of a Will, intestacy laws will ascertain how your assets are passed on, which may go against the interests of your loved ones. It is equally crucial to have a Power of Attorney in place to give your parents or loved ones the right to manage your finances in case you are medically unable to do so.

Think of this stage in your life as the ‘base stage’ to estate planning; a stage that will help in constructing and mapping the next steps to safeguarding your hard-earned wealth.

Family life, marriage
Getting married is undoubtedly a huge landmark in one’s life. From an estate planning perspective, it is a union of the assets of two individuals. Hence, you need to think through how your plan should reflect your objectives. Depending on your objectives, you may want to align your plan with the aim of protecting the interests of your partner too. Also, for a few communities, such as Parsis and Christians, the Will stands revoked by marriage, thereby making it necessary to review the plan.

With relationships taking a sour turn in some cases these days, parents want to safeguard wealth for their children. While prenuptial agreements are not legally recognised in India, one may evaluate how wealth planning tools such as Private Family Trusts may be used effectively.

Phase of greater responsibilities: Birth of a child
A birth in the family calls for crucial estate planning; an exercise that should be carried out the day you are blessed with a child. A Will enables parents to appoint guardians who will not only be responsible for managing the finances, but more importantly the upbringing of the child too. In the absence of guardians, the Court may appoint an individual who may not be best equipped to take care of the needs of your child.

To create a cushioning period to distribute wealth to your future generations, you may also reflect on having a Trust and/or ‘mirror estate plans’ whereby spouses are the first level beneficiaries to avoid the child from bad influences due to inheritance of significant wealth. Further, a Trust also helps to mitigate the possibility of misuse of wealth by guardians in the absence of both parents.

Legacy Planning: Golden years of your life
Most individuals look forward to this phase after years of gruelling hard work. Your children may have left the nest and you would have accumulated a sizeable wealth. If you were consistent with re-equipping your plan from time to time, you will not be left feeling overwhelmed. In fact, you will find yourself at peace knowing that those close to you will be well taken care of after your lifetime.

This phase calls for updating your Will to reflect your changed circumstances, demarcating a plan to reduce administrative burdens on family members or ascertaining the need for alternative succession structures. Further, take this time to discuss your plans with your heirs, as this will reduce possibilities of future conflicts among the family members and ensure your wishes see the light of day.

By getting yourself disciplined and organised in the early stages of your life, you are setting your family up for success by leaving your estate hassle-free for transmission. So, rather than fearing estate planning, embrace it as your personal road-map to life – one that helps you reach your desired destination!

SNEHA MAKHIJA is Head of Wealth Planning, Products & Solutions, Sanctum Wealth