Seven tips for friction-free succession planning

When you nominate a successor, it will help the nominee receive your assets in a hassle-free manner without having to go to the courts to obtain a succession certificate or a probate of the will.

Money Control | 5th August 2022

These days, succession planning has become critical for people in all walks of life. Typically, the process is more complex for high net-worth individuals, non-resident Indians and Persons of Indian origin. But to keep things simple, whatever your status, level of income, profession or age, keep these seven tips in mind when planning your succession and making a will.

Identify your financial and immovable assets

Before you make a will, you must identify what you have. You may think you have no assets, but look again!

You may have financial assets in the form of cash lying in bank savings or fixed deposits in India or permitted amounts in a foreign bank account, securities held in portfolio management services, mutual funds, debt instruments, bonds and shares or in any other form – gold, jewelry, art and artifacts, insurance policies and so on.

Also, you may have immovable assets in any part of India in the form of residential, commercial or industrial land, a plot with a building, a part of the building, apartment or flat, or a piece of farm land.

Is nomination enough? Not really

Most financial assets provide a nomination facility. This says that you can nominate to whom your assets will go on your death. This is a very important facility and one must avail of it very carefully and responsibly.

Under the law, a nominee is the trustee so whoever is appointed the nominee is deemed to be a trustee for all the legal heirs; so the position of the nominee is fiduciary and critical because the nominee holds your assets for all your legal heirs.

As far as immovable assets are concerned, most housing societies provide a nomination facility wherein you can specify someone as your nominee for an apartment; this is approved by the managing committee of the society and is taken on record. But in many states, for most freehold properties, the nomination facility doesn’t exist. So the only way out for you is to execute a will for the property in favour of your beneficiary.

Nominee is not a beneficiary

Most people misconstrue and misinterpret this facility, assuming that once a nominee is appointed, the nominee will receive their assets as their sole beneficiary. This is not correct. A nomination helps the nominee receive the assets in a hassle-free manner without going to the courts to obtain a succession certificate or a probate of the will.

In the absence of a will, the status of the nominee remains that of a trustee. Although the intention, circumstances and a few other factors may make a nominee the beneficiary, this becomes legally cumbersome.

So, if you want your nominee to inherit all your assets, make sure that you also execute a will declaring the nominee to be your beneficiary as well. This ensures that other legal heirs do not dispute the position of the nominee as the beneficiary.

A will requires two witnesses

It is critical that the will is executed properly with two attesting witnesses. Many times, a will is made without complying with legal requirements and this puts the beneficiary at a serious disadvantage. It’s like holding a gun without bullets.

The execution of the will should be taken seriously as inheritance is dependent on it being legally executable. There is no stamp duty applicable on the will nor is the registration with the sub-registrar of assurance mandatory. Registration of the will and /or videography is suggested on a case-to-case basis and depending on your relationship with the legal heirs and whether any of them may create a potential dispute.

Should you give away your assets through a will or transfer them?

A will comes into play after you are dead and gone. This is why you can change the will as many times as you wish.

You can use all the assets mentioned in the will the way you want to through your lifetime. There are no restrictions. For instance, you may say in your will that your house would go to your son. But that doesn’t mean the house becomes his in your lifetime. You can do whatever you want with your house – remodel or rearrange it, invite someone to stay over and so on. It will remain your house until the day you die.

A will does not create any restriction on the owner selling, alienating or dealing with the assets in any form during their lifetime. The will comes into play only after death. There is no transfer of assets before death.

Should you will or gift your assets away?

In certain cases, one opts to gift the assets to the wife or children/beneficiary during the lifetime only where one expects the will to be contested by other legal heirs. If the gift is made during when one is alive, the assets are transferred during the life time and so the will is not open to any challenge.

The disadvantage is that the owner is deprived of the assets during lifetime unlike in the case of a will. So this decision may vary from case to case depending on the circumstances.

Court fee on will probate

In most states, a will needs to be probated by a court, which is a tedious process. In Maharashtra, the court fee is fixed at Rs. 75,000. There are other expenses like payments for public notices in papers, lawyers’ fees and miscellaneous expenses.

The entire process, provided there are no objections by other legal heirs, takes about one year or a little more. In many states and Union territories, the court fee is charged on the basis of the market value of the estate. In Delhi, the court fee is 4% of the estate value, which is a serious cost for legal heirs.Our laws and processes are very old, and on the procedural part, the government should consider how the process can be made easier and less expensive. There is so much of pressure on the courts owing to these matters, which are otherwise procedural, and with application of mind, the entire process can be simplified.