EVERYONE talks about the importance of succession planning. What comes to your mind when you have to assign beneficiaries for your hard earned savings? It's a Will. But what if the Will is challenged once it comes into being. It will be difficult to clarify the soundness of the Will as the testator (one who makes the Will) would have passed away. Is there a better alternative to ensure a hassle-free process to bequeath wealth? The answer is Estate Planning.
What is Estate Planning?
Estate Planning is a process of accumulating and disposing of your wealth, be it cash, shares or property in a systematic and predetermined manner to a certain beneficiary/beneficiaries of your choice. This process is carried out through the Trust route. The testator sets up a Trust, which is manned by trustees appointed by him/her. The idea is to appoint third party trustees, so that the asset transfer process is carried out in a neutral manner. This also helps in maintaining the confidentiality of the Will.
How estate planning scores over a will?
The first step to estate planning is making a will. You have the option of transferring your assets to your legal heirs either through will or estate planning. Estate planning will gain ground in India because even today a large percentage of Wills get challenged. When Wills are challenged, it leaves individual beneficiaries and families in disarray. If an individual carries out succession planning through Trusts, in one's life time, then the possibility of loopholes is minimal. Moreover, an individual is perishable not the entire trust. There are evidences of deceit by individual lawyers at the time of the execution of Will. So setting up of a Trust will help especially those individuals who have a high net worth
Who offer these services?
There are some independent firms that specialise in such services. Recently, banks have started offering Estate Planning services for their HNI and ultra-HNI clients. They mainly include individuals, who have bank balances of a few crores of rupees. Banks and firms help I in a range services. Apart from helping the customers write a Will, they help you register and safe keep the Will. Banks preserve the Will in physical form as well as in e-form. Banks also help in setting up of the Trust, its registration, documentation management and execution. Over and above, such banks take care of legal and regulatory requirements. Further, they also help in filing tax returns and settling liabilities of the Trust. Usually, these banks work in conjunction with lawyers to ensure a smooth process of Estate Planning.
How much does it cost?
You can walk into your bank to seek its help in appointing the trustees or the bank can just handhold you till you set up a Trust. If you have to just make a Will, it might cost you anything between Rs 6,000 and Rs 10,000. Making of a Will, registration, other processes like safekeeping and execution will work out to about Rs 25,000. If you are taking your bank's help in setting up of a Trust, its management and execution, the bank will charge you 0.5-3% of total assets under management (AUM) as the estate planning fee. If you seek an independent professional the charges vary depending upon the service. The setting up of a trust, will work to a one time cost of Rs 2-3 lakh.
