How women can make a solid estate plan

 How women can make a solid estate plan

A Will is a must if you want to pass on your assets as per your wishes, but that comes into effect only after the testator passes on. A trust and a power of attorney takes care of people when they are alive. A solid estate plan includes all three.

In our last few post, we discussed the role and importance of an estate plan for women. It is essential that women do not surrender the responsibility of managing their financial affairs and devising their estate plan to their family, but take complete charge of this important duty. Usually, women are forced by life circumstances such as the demise of their spouse or a loved one, incapacitation of the breadwinner of the family, divorce, or terminal illness to look into their financial matters. However, managing these affairs in a timely manner safeguards not only your assets but also your wishes and choices.

Let’s us discuss the important aspects you should consider when designing your estate plan.

Last Will and Testament

A Will is a document that enables you to capture your wishes in terms of how you would like your wealth to be distributed after your lifetime. In the event you choose to not create this document, intestate succession laws will prevail whereby your assets may get inherited by individuals and in a manner not necessarily aligned to your wishes. Hence, putting a Will in place should be one of the first steps to safeguard your wishes as well as the interest of your intended beneficiaries.

As a mother with minor children ― married, divorced or widowed ― there is a greater responsibility to ensure you appoint a guardian in your Will who would manage the financial affairs of your children until they attain 18 years of age. Also, you need to ensure you have put a plan in place to ensure the child is brought up under the right supervision, guidance, caregiving, and set of value systems by entrusting the responsibility to the right set of individuals.

Further, as a married woman, it may be worthwhile to consider coordinating your estate plan with your spouse so that you both can be on the same page in terms of safeguarding each other’s interests as well as deciding on the subsequent manner of your inheritance.

As a single woman, you may not have dependents, such as children, and therefore, may not feel a compelling need to have a Will. However, do understand that in the absence of legal heirs, your hard-earned wealth may ultimately be taken over by the government. Hence, by writing your Will you hold a chance to decide whomsoever you wish to pass on your wealth to such as confidantes, friends, staff members, or perhaps even a charitable institute that supports the causes dear to you.

Power of Attorney

While a Will takes care of your affairs post your lifetime, a power of attorney is a document that can ensure your financial affairs are taken care of during your lifetime, for instance, in case of your incapacitation. In the event you are unable to manage your financial affairs due to any medical condition, you may consider appointing an individual, of course, someone trustworthy, to ensure your finances are not left in abeyance.

Private Family Trust

A Will may not suffice for large families where a complex mechanism of succession planning is warranted. A Trust is a structure that can be created during one’s lifetime whereby the beneficiaries are defined and the do’s and don’ts on the manner in which the Trust should be operated are mentioned by the creator/settlor of the Trust in the document known as the Trust Deed.

Typically, more often than not the men folk in the family set up the Trust for the benefit of their spouse, children and lineal descendants. A Trust is generally set up for a long tenure that may outlive the lifetime of the settlor, in which case the Trust is to be managed by the Trustees for the surviving beneficiaries. There is a certain struggle for the family members who outlive the creator of the Trust as they may not understand the exact mechanics and thought process for the Trust creation if not involved in the process of its creation. Hence, it is essential that women who are beneficiaries/Trustees of the Trust actively participate in the conception and structuring stage so that they can comfortably manage the affairs thereafter.

As you can understand each document has an important role to play as part of your estate plan, and you can choose one or a combination depending on your objectives. However, remember to review these documents on an ongoing basis to capture the changes in your life as well as laws. Further, ensure the individuals who will be responsible for carrying out your wishes, as per your estate plan, have quick and easy access to the requisite paperwork for your estate.

Therefore, as a woman do not overlook this important aspect of your life and wait for a life-changing event to take charge of your financial affairs, in which case it might be too late. The right time is now, as the saying goes, ‘Someone’s sitting in the shade today because someone planted a tree a long time ago’. So, ensure your loved ones enjoy the benefits of your hard-earned wealth by planning today.

Happy Investing

Source : Moneycontrol.com

Why women should have an estate plan

 Why women should have an estate plan

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.

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 few last posts, 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.

Happy Investing

Source: Moneycontrol.com