Why Estate Planning Is Important And How Should You Do It
Estate planning may be emotionally taxing and technically complex, but its importance cannot be undermined because of the uncertainties in life
Recently, 90-year-old Sita Chaudhry, sister-in-law of Raghvenra Singh, founder of DLF, had to take a legal course of action against her eldest granddaughter. Chaudhry allowed her granddaughter to live with her, but the granddaughter allegedly transferred most of the family’s wealth illegally, according to a report in Economic Times.
But does this sound unusual? In India, people generally do not plan their succession, and when things go wrong like this, it often becomes a high-voltage life-changing experience that one wouldn’t want to experience in their old age. This brings to light the importance of estate planning and why one should not wait for it until the last days of one’s life.
Incidentally, people often confuse estate planning with succession planning.
Says Maj. (Dr) JC Vashista, advocate, JVC Chambers: “Estate planning is the process of preserving, managing and dispersing the assets of an individual in the event of their demise. The term succession planning refers to a business strategy that companies use for passing leadership roles down to another employee or group of employees.”
What Is Estate Planning?
Estate planning means ensuring that everything in the family runs smoothly should a disaster happen. Even though estate planning may look as something that could be ignored while one is busy with other aspects of life, it is the actually the path to a safety door that opens up when an emergency occurs so that everybody stays safe and can continue with their life smoothly.
Says Vashista: “It is now gaining momentum and is being considered by many individuals to preserve the family wealth, avoid family disputes, and ease out the process after their death, especially since the onset of the pandemic. An individual’s immovable assets, such as properties, movable assets like car, cash, jewellery, shares and stocks, insurance policies and others, debts, loans, and even financial obligations become an important part of estate planning.”
Here are the reasons why estate planning is important.
Ensuring Family Harmony: Estate planning can save the family from getting into conflicts and infighting over property or other assets. Estate planning clearly mentions who will get what in legacy. This can save the family from detestable fighting to get their proper share in the assets. This way, one could ensure that there is no disputes in the family, thus ensuring that the relations remain harmonious.
Incapacitation: Estate planning is useful not only when the person dies, but also while the person is still alive and may be incapacitated due to reasons, such as an accident and illness. In such cases, someone trustworthy mentioned in the estate planning can make decisions on behalf of the person in terms of expenditure and allocation of assets.
Peace Of Mind: If you want your family to stay in good stead after you are gone, it is always advisable that you plan your estate distribution. A proper plan, once given a proper shape and legal status, gives immense peace of mind. The satisfaction of creating a plan for the distribution of assets to your children, spouse, family members, or anyone else could be a transformational experience.
Smooth Transition In Business: If one happens to own a business, then estate planning will need to take into account the business as well. One can decide the suitable succession to hand over the lead to for running the business.
Incidentally, in business context, this planning is known as succession planning. So, for a family-running business, estate planning may extend to succession planning in legal language.
Succession planning is equally important as estate planning because once the owner becomes incapacitated or dies, the question of who will be the next leader arises. So, for the smooth running of the business, the transition should also be planned. It also helps in maintaining the trust of stakeholders that the business does not have a succession risk.
Protecting Your Wealth From Misuse: When one consciously thinks of leaving assets in certain proportions to the family members under estate planning, one tends to plan for the long term. Thus, the person may not trust people randomly for financial and other serious matters.
Adds Vashista: “Death is imminent, so it would be an intelligent decision for a prudent person to plan for dispersing and passing on accumulated properties and/or assets after his/her death. It’s the process of arranging your assets and finances in a way that ensures your loved ones are taken care of when you are no longer around.”
How To Plan Your Estate
Learning about estate planning is incomplete until one knows how to do it. Ensuring a smooth life for your children and family after you leave this world is the main reason behind estate planning, and this is where a Will comes into picture.
Says Vashista, “Estate planning is done through Will to avoid uncertainty and secure the future of legal heirs.”
He adds, “Section 2(h) of The Indian Succession Act, 1925, defines a ‘Will’ as a legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death. Hence, a Will is a legal document that is prepared during the lifetime of the person (known as a Testator), but comes into existence after his demise. A Will is a legally enforceable document that entails the wishes of the testator (writer) for the distribution of the assets after death.”
So, once the estate plan is ready, make sure to write a Will to give a legal status to your estate planning. As the entitlement of whoever you want to bequeath your assets is clear, it will help in reducing the chances of fraud or misuse by anyone you do not trust.
The Supreme Court, on September 1, 2023, said that children born from an “Invalid Marriage” have rights to claim a share in parents’ property, both self-acquired and ancestral
A Will is a legal document that authorises another person to execute his plans after death.
Proper succession planning will ensure peace of mind for you and your children. Read on to find more.
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