A ‘Will’ Is Not The Only Way To Pass On Your Legacy
Do your estate planning well in advance for a smooth transition of your legacy; here are some ways other than a will to pass on your inheritance.
A will is a legal tool to pass on your legacy after death. It could be a house property or any other assets of value that you want to pass on to your spouse, children, or other family members. Although will is a widely used tool, it is not the only method to bequeath assets legally.
According to Bijal Ajinkya, partner at Khaitan & Co., a law firm, “Legacy means different things in different situations; it could mean legacy on values, legacy on leadership, legacy on management, and legacy in wealth. The most commonly structured legacy in today’s day and age is that of wealth. It could be passed on in many ways, be it a lifetime gift (with or without reservations), be it a private trust (revocable or irremovable), philanthropy and the public good, or simplistically a testamentary document like a will.”
Let’s delve into the details.
A Will is the most popular instrument for distributing assets among family members or others as per the deceased’s last wishes. The will of a person is legally enforceable. An individual with a sound mind can write a will any time after turning 18. It can be written in any language and can be handwritten. To make it a valid document, a will must be signed by two witnesses and by the testator in the presence of each other. One can also create a will online and modify a will as per the changing situations.
However, a will can be executed only after the death of the testator or the person who created it. One cannot transfer a legacy as long as the testator is alive. However A ‘Will’ Is Not The Only Way To Pass On Your Legacy, what if one wants to transfer the assets during their lifetime? In that case, one can gift assets during their lifetime. But they must execute a gift deed to bequeath an asset or assets to someone during a lifetime.
A gift deed is a tool executed when the person is alive. Through this tool, one can transfer property or assets as a gift to a family member during a lifetime and avoid disputes after their death. But, this involves some costs, such as stamp duty, which varies from state to state and from movable to immovable property. Parents can transfer their assets to their children or relatives. However, one cannot revoke a gift deed. If these gifts are given in expectation of something, like being cared for in old age, but do not receive care in return, the donor may be at the losing end. Many old parents often approach courts when children stop caring for them after acquiring the property. And they cannot do much about it because a gift deed cannot be revoked.
Also Read: Does A Will Supersede Nomination?
A trust deed is another method to plan your estate. A trust allows a person to transfer assets to a trust, a legally binding entity, which further passes it on to beneficiaries according to the person’s desires. The trustees manage a trust. It transfers assets to beneficiaries according to the desire of the person who creates the trust (the settlor). The settlor can state the beneficiaries to whom the assets will be bequeathed. A trust deed of a family, also called a family trust, allows the settlor to take complete control over the trust. It can be executed during the settlor’s lifetime or after death, as per their wishes. The settlor or the asset owner can keep control over the assets, unlike with a gift deed, where control of the assets is transferred irrevocably to the other person.
However, a trust operates differently. The Trust must be registered, and the trustees must be paid a salary besides stamp duty and other trust expenses. A family trust can manage one’s assets during a lifetime or after death and is especially valuable in succession planning, where the family has a business and there are personal and business assets. Another significant benefit of a family trust is that it could be revocable or irrevocable, living or testamentary. In a living trust, the settlor transfers ownership to the trustees, and in a testamentary trust, ownership of the asset is transferred to the trust after the settlor’s death. A revocable trust can be amended or terminated during the settlor’s lifetime or after death. On the other hand, an irrevocable trust cannot be revoked after it is created.
A ‘Will’ Is Not The Only Way To Pass On Your Legacy. While planning estate sometimes people are unaware of Gift Deed and Trust Deeds.
Tax Implications And The Best Option:
According to Ajinkya, “There are no tax implications on the person who is giving whether it is in the form of a gift, contribution to a private trust, or for that matter for assets passing under a Will. When assets pass to a person under a Will, there is no tax to be paid (by the receiver). If assets are passed under a trust or as a gift, and the donor and donee are relatives, there would be no tax to be done on the transfer.”
As there is more than one option to pass on the legacy to loved ones, one can consult a lawyer to know the best option based on wealth and circumstances. Ajinkya opines, “No size fits all. Careful planning on a combination of the same is always the most preferred plan. Excess wealth, which a person believes would not be needed in their sunset years, can be gifted to family members or contributed to a trust, ensuring security for the wealth generator through their lifetime. The security kept aside can pass under the Will of such an individual.”
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