Whenever Estate Planning discussed the general perception is that it is mainly for riches and I do not have large assets to really plan for. Thatโs the main reason why individuals do not really plan it. In fact, through numerous cases, we are seeing that even the riches with big estates fail to plan wisely and leave the legal heirs in a long disputable situation.
What is Estate Planning?
Estate Planning is not a high school puzzle to resolve. Estate Planning is about in your lifetime laying down clear and specific processes for management and disposal of your estate in your lifetime or after death when you are no more. This means you pen down your wishes as to who gets what part of your legacy and why and bring strategies and tools like nominations and Will so that there remains no confusion afterward. There are many aspects considered when you are planning ahead. These are such as income tax on your legal heirs, the cost involved in the transfer of assets etc. Contrary to this If you die without planning distribution of your estate then in India the Indian Succession Act decides who takes what but mind you its equal for rich and not so rich. So whether you have rich assets or not does not really matter for the law. What matter is whether you have indicated anywhere how your assets should get dissolve.
Apart from this estate planning is also about building a legacy for your family. The tools like life insurance, Will, Trust etc.. are the means through which you achieve this objective.
How is it different from Succession Planning?
Estate planning is the process of managing the disposal of your personal assets to your loved ones. Where Succession planning is the process of identifying new leaders who can succeed you probably in your business when you are retiring or no more. In succession planning process you nurture these leaders and then when the time arises they succeed you to take care of your business legacy. How they will succeed, what structure be followed, the cost etc.. is what succession planning is all about.
To make you understand take an example of a business of a proprietor. It has taken years to build it and now the time has come where it needs to be passed on to the next generation. But proprietor businesses do not get transferred. So whether to form a partnership, create a private ltd company or move the business to a trust structure with a successor as trustees is what succession planning will include.
Your Estate Planning Kit:
Estate planning is important because if not planned well, your family will suffer later. But many of us do not think beyond creating a nominee in our financial assets. It is thus necessary that you prepare an estate planning kit for yourself which you can upgrade and review periodically.
Here is what the estate planning kit should include:
Your Legal Heirs Details: Who are the legal heirs who can claim your legacy. Their addresses, their identification documents etc. should be the first part of this kit.
Your Assets: What are the assets you own today?. The details of your assets should clearly specify the type, institution, a unique number for identification like account number, ISIN number etc. and the total value.
Nominations: Thatโs important. There are assets Like EPF where the nominee is the final recipient of the asset as per EPF act. But there are other assets where the nominee is merely a custodian. Having a nomination simplify the process of transfer of your wealth. Thus the next checklist in your kit should carry the details of the nominee in your financial assets. Ideally, this nomination should be the wish you would have pen down in your Will. A checklist like this comes handy for keeping a record of your financial investments
Will: This is an important document as it lay down your wish for your legal heirs. Who gets what and how is what you would have penned down in this document.
Others: There might be other documents like power of attorney or a trust deed which will become part of your Estate Planning Kit.
