Money Control, May 30, 2022
Estate planning is often left for the last minute, kept secret even from beneficiaries, and not given priority. Such mistakes can be harmful.
People spend years working hard to create wealth but pay little or no heed when it comes to planning to ensure it is enjoyed by the intended recipients. Estate Planning is often avoided on various pretexts — ‘Too young to plan’, ‘Not having a huge asset base’, ‘Small family’, ‘Have nominations in place’, etc. — but the fact of the matter is, if you have an asset and have a desire to pass it on to a loved one, you need to plan. Everyone can benefit from some level of estate planning, so do not let excuses get in the way.
It may be worthwhile for you to be cognisant of things to keep in mind, which are often disregarded, while putting together an estate plan. Let us discuss a few of them:
Do not keep it low on the priority list
For many people, Estate Planning does not feature as an item of priority in the to-do-list. Even if you get started you may tend to become laidback about completing it. Perhaps because you are of the view that it does not serve any purpose during your lifetime, which is far from the truth. Uninterrupted management of your assets in case of a medical exigency, insulating your assets from unforeseen risks due to business and/or family issues, consolidation of assets for ease of management, and a disciplined way of holding assets for ease of transmission are some of the benefits that you can enjoy during your lifetime by having an estate plan in place.
It is important to realise that we cannot predict the tenure of our life span and hence it becomes imperative to put a plan in place today to avoid the downsides of intestate succession laws and your wealth being inherited by undeserving persons.
It’s more than putting pen to paper
An estate plan should not be limited to merely putting your wishes to paper. More often than not we tend to document our wishes on how our wealth should be distributed and believe we have completed our Will. However, it is essential that whenever you put any estate planning documentation such as a Will, Trust deed of a Private Family Trust, etc. in place you weave in the practical aspects as well.
For instance, in the Will you may have mentioned all your assets must go to your spouse, but what if you hold assets jointly with your mother or perhaps you may have nominated your children for certain assets? Such non-alignment of ownership patterns and nominations with the manner of bequest in your Will can lead to a delay in transfer of your assets to your desired recipients.
Keep a record of your estate holdings
Recent data by regulators suggest that approximately Rs 80,000 crore of money is lying unclaimed across banks, mutual fund houses, insurance companies, etc.
This wealth transmission loss points to a very pertinent step that is often overlooked while putting your estate plan in place. You may have written your Will to communicate on how your wealth needs to be distributed. But have you pondered as to how your executor(s) (who are in charge of carrying out your wishes as stated in your Will) and your legatees (i.e., the persons who are the beneficiaries of your estate) will gather information pertaining to your estate, which will be essential to locate and transfer your assets?
Hence, it is very important for you to maintain an inventory of your assets and liabilities for ease of access by relevant stakeholders.
Let stakeholders know your estate plan
The usual tendency of most individuals is to keep their estate plan a secret.
While it is a good practice to keep such things confidential, it should not be to the extent that the beneficiaries who are supposed to receive your assets and the executors who are in charge of helping transfer the assets are unaware that such a plan exists.
As an estate plan is reflective of an individual’s personal situation, one may have to evaluate how such information is disclosed and to what extent, but the bottom line is to ensure that the relevant stakeholders are informed to minimise confusion and provide a clear direction on how you want your assets to be handled.
Avoid adopting a ‘DIY’ approach
A good estate plan should consider legal, tax and regulatory implications, not just for the person making the plan but also for the beneficiaries of such plans, which can sometimes involve cross-border laws. Consulting a professional helps you take these aspects, which are often overlooked in a DIY (do it yourself) approach, into consideration. Hence, it is important to consult experts to avoid such mistakes and create a comprehensive plan that addresses your needs, taking into account your background and that of your beneficiaries.
Putting an estate plan in place can be a complex exercise. While certain lapses in a DIY approach may be minor, there could be others that can have far-reaching consequences. Hence, it is prudent to seek the advice of a professional to ensure your hard-earned wealth actually reaches the intended recipients.