Will and the Common Man

WILL
Will and the Common Man
By Advocate Vinod Sampat
Mr. X was disappointed. He had counted on funds received from sale of his properties to help him finance after his retirement and to give reasonable amounts to his family members as well as for charities. Mr. X was also in possession of some ancestral properties. There were some disputes amongst the brothers of Mr. X. Mr. X expired without making a will. These expectations were dashed out on account of the fall in the market value of properties. As well as the heavy dose of taxes that he had to pay at the time of selling the properties. This could also get more complicated with the objection of Mr. X’s brothers to the ancestral properties. These complications had to be faced by Mrs. X.
Mrs. Y was disappointed. Soon after the untimely death of her husband she started receiving notices from different government authorities for stamp duty payment, payment of income tax, payment of sales tax. Her husband had always told her that she would not have to worry. Everything would be taken care of by him within a short span of time. But death cannot be predicted. Since he died without making a will, some of the assets she depended on were frozen. She was advised that she had now to appoint an advocate to find out what asset her husband had left. She was also told that some portion of these assets would be transferred to her husbands children by a previous marriage, even though she knew that this was not his intention. Faced with the crushing reality of being a widow at a young age she was confused by close relatives giving advises contradictory to each other.
Mrs. Z also suffered the tragedy of losing her husband to an untimely death. She took comfort in the knowledge that her husband had made adequate life insurance provisions so that she and their two children would be provided for economically. She also understood what assets became hers immediately upon the demise of her husband and what assets would be coming to her children and what assets would be coming to her through her husband’s will. Although adjusting to the challenges of widowhood, she was deeply grateful to her husband for being so considerate in organizing his affairs, so that his death had virtually no financial impact on her and the children. What made the difference from the planning point of view of Mrs. X, Mrs. Y and Mrs. Z? Estate Planning.
Estate planning is simply a process of deciding how your assets will be distributed at your death and then taking steps to carry out your decisions effectively and economically. Such steps may involve (a) tilting assets, (b) naming beneficiaries, © creating such documents as wills and trusts. In complex situations it will involve much more. While most people would no doubt agree with the wisdom of having proper planning as well as of drafting a will. In reality very few people are executing a will. Typical excuses for not executing will are :-
(a) I am still young.
(b) I am too busy.
(c) There is peace in my family.
(d) Shall do the planning of drafting the will next month.
(e) I am going to dispose of some shares next month.
(f) I will give a thought about drafting a will at a later date.
(g) I don’t have money or valuable things to pass on.
(h) I don’t know where to start.
(i) My parents had never made a will and on one in our family has faced any such problem.
(j) Drafting a will may may lead to disputes amongst the children.
Agreed that drafting a will may be a time consuming process. But getting started is often simply a case of getting organised and understanding the need to take a decision. Like many things drafting of a will is not at all difficult if one has a clear cut understanding of what one wants to give to whom and when it should be given. It will be much simple if the whole work is bifurcated into steps and tackled one step at a time.
The first Step.
The first step would be to make in inventory of one’s assets. Most assets can be classified as
(a) Securities (stocks, debentures, bonds, investment in mutual funds)
(b) Property (flat in a co-operative society, office premises, factory, bunglow at hill station, residence at native place)
(c) Bank investments (saving account, current account, fixed deposits receipts, recurring deposit accounts)
(d) Personal property (collections, art, jewellery, cars, furniture)
(e) Insurance (life insurance policies, retirement benefits)
(f) Post office investments (India Vikas Patra, National saving schemes, N.S.S. Scheme, time deposits).
After listing what you own, make a list of what you have to pay such as mortgages, loans. Substracting these liabilities from the total of your assets shows your net worth.
The Second Step
One should look at ones ultimate objectives. Not in terms of amounts but in terms of what you want to accomplish for both yourself and your beneficiaries. Typically, a married person would like to have security for his or her spouse. A parent would prefer to provide some measure of financial protection for his or her children and adult may want to arrange for the care of an elderly parent. One would also like to remember certain friends or charitable institutions to whom he would like to give some amounts. One should not forget to provide for various contingencies that can effect the estate plan. Example if the beneficiary predeceases you? In such circumstances, would one like that the share go to his/her spouse, children or perhaps someone else?
The Third Step
One should select some responsible person for carrying out your wishes in most cases one would need an executor and perhaps a trustee. No matter whom one selects, it is advisable to have atleast tow persons. It should be ensured that everyone you name in the Will is willing to take-up the job. It is also advisable that the executors are young. The executor is one who will gather your assets after your death handle your legal or probate proceedings and ultimately distribute your assets according to your wishes. A family member is often the best choice for the responsibility although an advocate may be preferable if your situation is complex. A guardian should be named in your will to raise your children in the event that you and your spouse die while the childrens are still minor. If your plan includes trust for your children, than the guardian can also be named as the trustee provided he or she has has the skill to manage the fund.
The Fourth Step
One should understand the tools available to help you accomplish your objective. Do you wish to make an outright gift or would you rather leave property in trust for ones benefit? There is a big difference between the two. When you make a gift while you are alive, than your interest in the property ends immediately. You will have no control once the GIFT DEED is executed and registered. However, if you are making a trust executed under a will you can exercise some control over property i.e. property left in trust. The Trustee you name, will manage and use assets for the benefit of the beneficiary according to their individual needs and than dictate at what age a child can acquire over the assets contained in the trust. You can also do your tax planning through a will. Having regards to the probate rules and regulations it is advisable to bequeath at least a small portion of the assets to a female member whereby one can save substantial amounts on court expenses.
Although many may be involved in the planning stages, your final estate plan and the necessary documents should preferably be prepared by an advocate who specializes in drafting of wills. You should feel free to ask any adviser about his background and experience with regards to drafting of will. If you have a particular concern, such as passing a business down to your family or caring for a disabled relative, ask the adviser if he has had previous experience in such areas. In all cases, you may ask for an explanation of what the charges will be for services rendered and get this understanding preferably in writing.
Drafting a will is an area where a little knowledge can be a dangerous thing. Consider as an illustration of a couple whom we will name Paul and Mary. They wanted to leave all their belongings equally to their three daughters. Since their daughter Sarah was living next door to them, they decided to add her name to their own, jointly tittling their assets. This way they thought, “Sarah will be able to manage our assets if we become disabled. Additionally, jointly titling everything with Sarah means she will be the sole owner at our deaths, and we will avoid the need for a will and probate. She can just split whats left with her sisters after we’re gone. But things did not work out as Paul and Mary had planned. After her parents death, Sarah did share their estate with her sisters, but the transfer to them brought about a tax/stamp duty liability that greatly reduced her share. Besides, being a joint owner did not give Sarah all the management capabilities her parents had wanted her to have. Paul and Mary’s objectives were good. They wanted to ensure that they would be cared for in the event of their disability. They also desired a smooth and inexpensive transfer of their assets to their children. However, they chose the wrong tools to carry out those objectives.
Drafting a will should not be a once in a lifetime exercise. Periodic review is necessary because tax laws change, inheritance laws change and circumstances in life charge. The death of a relative, the birth of grandchildren, the receipt of an inheritance, and the growth of an asset are all events that could trigger the need for a review of your estate plan.
Yes, drafting a will is a challenge. It involves time, energy, and dedication. And it frequently involves making some hard decisions. Drafting a will is a deeply emotional process for some persons. It involves the people and the causes you care about and your wishes for their future. It makes serious inward searching to decide what you want to do with your assets and to determine the best way a accomplish these goals. However, if one does not give proper attention with regards to drafting of a will, serious problems can result as illustrated in the abovesaid examples. The rewards of making a will normally justify more than the time spent on getting a will drafted particularly if one has substantial assets. The greatest reward is the peace of mind that comes from knowing you have an up-to-date plan to protect your loved ones.
TIPS
While drafting a will one should always remember that the witnessess should not be receiving a single rupee as a beneficiary. If this precaution has not been taken then the whole will could be null and void. As a matter of abundant precaution the witnessess should be selected who are of a young age. While drafting a will a residuary clause should be inserted and the benefit of this clause as far as possible should always go to the person to whom the maximum share is planned. The assets keep on changing with the passage of time and the items not specifically mentioned would be covered under the residuary clause. It is always advisable to register a will. Legally speaking a will is not required to be on stamp paper. It need not be registered but if it is registered it is better. As a matter of abundant precaution if one is not keeping good health one may also take a doctors certificate that the person is capable of making a will.