How your parents can easily implement “Who gets what?” (legacy planning)

Image of a person giving property keys to heirs as part of proper legacy planning

Published: June 1, 2020 at 10:46 am

Last Updated on

If your parents (or you yourself) have significant assets (property, gold, bank deposits, mutual funds, stocks etc) and more than one legal heir, a few simple steps can ensure who gets what asset after their (or your) time. A discussion (and this is not just about writing a will!). You can gently share this article to your parents instead of asking them to write a will!

Legacy planning refers to how a person’s assets would be managed when they are too old to do it themselves and how the assets would be divided among legal heirs. It is more than just a will because it involves steps which would make the transfer of assets after death (aka estate) easier.

Legacy planning can also involve a living will with instructions on how caregivers should act when a person’s quality of life cannot be improved by medicine and the end is only being postponed. See: What is a living will, why is it important, how to make one & how it can help our loved ones

Some argue that legacy planning is more comprehensive than estate planning while others argue it is the same. The key idea is to ensure our assets are managed the way we want during our last days and also how it is managed for the benefit of our spouse or partner with the help of a SEBI registered fee-only advisor or with the help of trusted family members.

How to create a legacy plan?

  1. Decide on requirements before and after death
  2. Decide “who gets what”
  3. Discuss who will get what with legal heirs
  4. Make the transmission as smooth as possible (see below for examples)
  5. If the spouse, partner or children require hand-held assistance, employ a fee-only planner or trust and knowledgeable friend or family member.
  6. A will may not be necessary if all legal heirs understand and appreciate the estate division.

Examples of the transmission procedure

Banks

If you can divide your bank assets among the legal heirs, make them the second holder with a survivor clause (either or survivor; first or survivor), then the transmission is quite simple.  In this case, a nomination is not necessary and in fact useless.

The second unit holder can approach the bank with the death certificate (DC) and request they be made the first unit holder. The bank would then “circle out” the first holder’s name, mark as deceased and shift the account to the 2nd holder. No further documentation is necessary.

If you are the sole account holder and make your children as nominees (as per your desire) then the bank would (in addition to DC) require a legal heir certificate or a notarized copy of the probated will.

Do you want to write a will and probate it now? Or would you like to name distinct second holder or distinct nominees? In the case of nomination alone, they would have to apply for a legal heir certification from the Tahsildar office of your constituency. This can be done online in many states and an official would come to visit to verify claims.

The third situation of no nomination and no will would invoke intestate succession laws but the whole point is to avoid that and we shall not discuss this any further.

Mutual Funds

No distinction in requirements for nominee and second unit holder. No legal heir or will is necessary. If the person is already a mutual fund investor (nomination only case) then  KYC and FACTA would already in place with a verified bank account. Else these need to be provided.

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The process is significantly more complex if there is no nominee. Indemnity Bond and Individual affidavits from legal heir/s are required. If the amount is less than two lakh then some evidence of the relationship is necessary. If above two lakh then legal heir or probated will is required. Source: AMFI guidelines.

Moral: make sure a nomination is present for all MF accounts if you are the sole holder!

Property

This is obviously the most complex. A will becomes essential if you sense trouble/disputes after your time. In the case of a single property, one of the joint holders will have to be the surviving spouse/partner. A will can ensure the deceased person share passes on the spouse if there are other joint holders.

If the survivors or only children, it is best to consider each child’s economic circumstances, discuss with them beforehand and ake suitable changes in ownership or shares.

For example, we do not want a situation where a rich child living abroad has equal share in your house where a not-so-rich 2nd child lives.  This can lead to hardship for the 2nd child. This is a complex subject and some vision on your part is necessary.

HUF owned properties will invoke co-parcenary laws. It is best to take expert guidance in all property-related estate planning if you do not have the patience to read through regulations.

Other physical assets

Gold, art, comic book collections (ahem) etc should also be carefully planned. Like always it is best to sit down with the family and decide who gets what. They may fight over these after your time but, you can only control what you can control. Turns out there is quite a bit you can control!

It is not my intention to claim that a will is not important. Of course, it is! My point is, proper dialogue after deep introspection, plus a few simple steps would ensure no one will wait with bated breath as a will is read out like in the whodunits.

That is perhaps the key difference between mere estate planning  – letting your heirs find out who gets what – and proper legacy planning – discussing with them who gets what and making sure the transmission is smooth emotionally,

Slip this article into your parent’s attention then you do not have to get all icky talking about a will.

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