Skip to main content

Creation and preservation of wealth

Similarly, papers of his investments in stocks, mutual funds and gold existed in the bank lockers. But the family was not aware of it. Importantly, Sharma has not created a will that would have specifically identified the heirs to his property.

All the family got to know in the initial months was that Sharma had taken bank loans to expand his business.

Soon the family found itself in a severe fund crunch. Loans were paid back from the proceeds of the life insurance policy. But two of his properties went into litigation – a serious money guzzler for a family strapped for cash.

Finally, Sharma's wife decided to let go of two flats to his extended family and sold the plot of land. To her relief, the chartered accountant was able to locate the missing investment papers. And after over one year, the family was able to settle down.

Sharma's case is not is isolated, especially in small business families, and even among professionals. While people like Sharma create wealth, their families are unable to take advantage of this. This is simply because of lack of proper planning, more importantly, lack of a proper will.

Creation and preservation of wealth are important but it must follow proper distribution among people for whom it is meant. That's why an overall financial plan must consider distribution of wealth as a key objective for smooth transition of your wealth and to avoid conflicts within the family.

ASK THESE THREE QUESTIONS:

If I die, what would happen to my wealth?

Does my spouse know about all the insurance, investments, debtors and creditors that I have?

Will my wealth be distributed as per my wishes? If you don't have satisfactory answers to the above questions, it's time you met a lawyer for estate planning. The cost to make a will can range from few thousands to much higher amounts, depending on the complexity of the document and the reputation of the lawyer.

LET'S LOOK AT WHAT GOES INTO DISTRIBUTION OF WEALTH:

Estate: The sum of all the assets of aperson, less his liabilities becomes his estate. In short, all properties, bank accounts, investments, insurance and collectibles, less the liabilities of aperson, are collectively called a person's estate.

Will: It is a document that ensures that your wishes, with respect to your estate, (assets less liabilities) are followed after your death. In legal language, a will is defined as "the legal declaration of the intention of the testator, with respect to his property, which he desires to be carried into effect after his death". In other words, a will or a testament means a document made by person whereby he disposes of his property, but such disposal comes into effect only after the death of the testator.

Testator: A person who makes his will is a testator.

Executor: A person, who executes the contents of the will after the demise of the testator, is called the executor. The executor is the legal representative for all purposes of the deceased person.

Legatee/Beneficiary: son who inherits the estate under aWill.

Intestate: without executing (making) a valid last will is known as dying intestate. In such a case, the heirs would be governed by the Succession Act or Personal Law of the deceased. The Succession Act or Personal Law of the deceased gives order of succession.

Probate: This is the legal process of settling the estate of a deceased person, specifically resolving all claims and dissitate a major change in the will. Instances such as a divorce or a family dispute too will require changes. Make sure the will actually reflects your wishes at aparticular point in time.

 

Popular posts from this blog

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Stock Dividend Yields

During a bull run, it’s very easy to ignore stocks with high dividend yields. After all, what could be more enticing than a growth stock? But in times of crisis, these boring ones tend to be the most sought after. The reason being that not only do dividends provide a cushion when the market is in the doldrums but such stocks also tend to fall less. The lure of dividend yield stocks is not easy to ignore. These stocks offer capital appreciation as well as cash payments. But logically, any company that pays a substantial portion of its earnings in dividends is reinvesting less and, therefore, would grow at a slower pace. So the trade-off is between higher dividend yields for lower earnings growth. On the other hand, companies with high growth potential and volatile earnings tend to pay less by way of dividends, if at all. Such companies would rather reinvest their earnings to sustain their growth. The capital appreciation of growth stocks is obviously higher than in dividend yield ones. ...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

JP Morgan ASEAN Offshore Fund

  JP Morgan ASEAN Offshore Fund - Invest Online JP Morgan ASEAN Offshore Equity Fund is an international equity mutual fund scheme that invests primarily in companies of countries which are part of the Association of South East Asian Nations (ASEAN). Most international funds , apart from those focused on the US market, have been struggling for sometime. This is because of the uncertainties in the global market. International funds are meant for investors who want to diversify their investments across geographies. If you haven't made your investment for this diversification, you should sell your investments in this scheme.   Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now