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Women’s Day: Why women should have an estate plan

Mumbai, Mar 8, 2023

Women need to create an estate plan, so that they get to choose the beneficiaries of their wealth and are able to manage their financial affairs, in the event of incapacitation.

By Sneha Makhija is Head of Wealth Planning, Products & Solutions, Sanctum Wealth

Estate planning is essential for every woman — whether she is single, married, divorced, a homemaker or doing business.

The common misconception is that if the major assets are held by the male members in the family, or if a woman is a homemaker, a woman does not need an estate plan.

While in our last column, we discussed the top reasons why a woman should actively participate in financial matters, let us now understand the role and importance of an estate plan for a woman.

Estate plan and intestate succession
An estate plan enables one to prepare for the management and disposal of one’s assets in the event of one’s death or incapacitation. If one does not prepare an estate plan, things are left to chance, more specifically to the laws of intestate succession. Intestate succession means that upon the demise of an individual, his/her wealth will be distributed in a predefined manner to predefined individuals as defined under law in the absence of an estate plan.

Regrettably, there is no unified body of inheritance laws in India. The inheritance rights of men and women are defined separately and differently under various inheritance laws such as the Hindu Succession Act, 1956, that includes Jain, Sikhs, and Buddhists, the Indian Succession Act, 1925, that includes Parsis, Christians as well the Muslim Personal Law (Shariat) Application Act, 1936, for Muslims) determined predominantly by religion, marital status, and source of assets.

Learning it through Radha’s experience
Radha lived in Mumbai with her spouse Gaurang in a rented apartment. Her in-laws lived separately in their own apartment. Her mother and sibling lived in Delhi in the house of her father, who passed away intestate.

Unfortunately, Radha’s spouse had an untimely demise, and he, too, passed away without a Will. This resulted in intestate succession laws to prevail. Was this manner of distribution under intestate succession as per Gaurang’s wishes or did he want to leave the assets exclusively for Radha? Was Radha’s financial future secured?

Property and inheritance rights of women
Let us now understand Radha’s rights of inheritance in the estate of her spouse, in-laws, and father. As Radha’s spouse passed away intestate, his assets were distributed equally between his mother and Radha. This means the ownership of all his financial assets and his one real estate in Jaipur was transferred equally between Radha and his mother.

As Radha lived in a rented apartment and was suddenly burdened with financial responsibilities, she left the rented apartment and wanted to stay with her in-laws. However, a daughter-in-law has no direct right over her in-law’s wealth, except to the extent inherited through her husband.

As Radha didn’t share a good equation with her in-laws, they refused her shelter in their Mumbai home, and, legally, Radha had no right to claim.

She then decided to go to her father’s home in Delhi. As Radha’s father, too, had passed away intestate, Radha had a right over her father’s property (comprising real estate, financial assets, and coparcenary rights in her father’s HuF) as his daughter.

However, her brother and sister-in-law chose not to cooperate. Radha had a right to legal recourse but didn’t have the financial resources nor the mental bandwidth to get into a legal battle. In hindsight, had Radha claimed her right and done the requisite paperwork to transfer the title in her favour immediately upon the demise of her father, she might have been in a desirable situation.

Radha decided to sell Gaurang’s Jaipur property, which she inherited to create financial liquidity. However, as her mother-in-law, too, inherited 50 percent rights over the property, she decided not to cooperate.

Further, only 50 percent of the financial assets that belonged to Gaurang got inherited by Radha, leaving her in not a secured financial position.

Radha’s case clearly shows how one can safeguard the financial future of a loved one by devising an estate plan or lead one to live a life of great struggle in the absence of one.

On the other hand, if a woman passes away intestate, her assets at the first level get distributed equally between her husband, children, and grandchildren. In the absence of first-level heirs, her in-laws have the first right over her assets, followed by her father and mother.

However, the assets that the woman may have inherited from her in-laws/husband will devolve upon her husband’s heirs while assets inherited from her parents will devolve upon her father’s heirs.

Would Radha want intestate succession rules to prevail for her or would she prefer to pass on her wealth to her chosen recipients?

Through Radha’s case, you may have realised how the laws are too complicated that may not necessarily lead to a smooth and desired transition of wealth in the hands of a woman in the absence of a well-devised and documented estate plan.

Hence, to overcome the uncertainties of intestate succession laws, it is crucial that, firstly, an estate plan is put in place to secure the financial future of women.

Women need to create an estate plan, so that they get to choose the beneficiaries of their wealth and are able to manage their financial affairs, in the event of incapacitation.

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