What is Estate?
Estate consists of various assets like immovable properties: House, factory, shop, office, farm, etc. and movable properties: jewellery, paintings, cash & bank balances, bullion, shares, mutual funds, insurance policies, recurring & fixed deposits etc.
What is estate planning?
Estate planning is a systematic continuous process to control and mange assets fulfilling various familial, social & spiritual obligations while protecting the assets from creditors and optimising various costs.
Estate planning has varied objectives:
• Person want to retain control and management of his assets during his life time am=nd also after his death.
• He wants to transmit his assets amongst the family members whether existing or non-existing.
• He wants to protect his property from the creditors.
• All this is done at a optimised costs. Costs can be taxes, stamp duty, etc.
Estate planning for whom?
It is generally thought that estate planning is required only for the HNI or wealthily person. Middle class families who are barely hand to mouth is not required to do any estate planning. It’s a myth. In fact, every person irrespective of economic standing, age, marital status is required to plan for his estate.
Estate Planning devises
Estate planning can be devised using one or more of following:
b) Trusts private or public charitable
c) Mutual Wills
d) Joint ownership, tenancy in common
e) Transfers during lifetime
At times each of the above devises is used in the complex structure. Complexity further added depending upon the place of situation of the property and applicability of personal laws.
The rights and obligations of the deceased person get transferred to the living person under the process of succession. They pass to some person, whom the dead person or the law on his behalf, has appointed to represent him in the world of living.
Succession depends on:—
(a) The law applicable to the deceased at the time of his/her death
(b) The machinery of succession, whether
(i) Testamentary under Will of the deceased, or
(ii) Intestate in the absence of valid Will, or
(iii) Operation of law, by nomination, transmission,
(c) The nature of property or rights and obligations held by the deceased at the time of death.
Succession of the movable property in India of a deceased person is regulated by the law of country in which such person had his domicile at the time of his death. If a person dies leaving movable property in India in absence of proof of any domicile elsewhere, law in India regulates succession of his movable property.
The laws of India regulate succession of the immovable property situated in India, wherever such deceased person may have/had his domicile at the time of death.
Laws governing the succession of the deceased person at the time of death are dependent upon the nature of persons, which are as under:
(a) Hindu Succession Act, 1956 and some provisions of Indian Succession Act mainly govern Hindus, Buddhist, Sikh and Jains.
(b) Mohammedans are mainly governed by their Personal Law.
(c) Indian Succession Act, 1925 is applicable to others; i.e., Christians, Jews, Parsis (as applicable to Parsis) and the person whose marriage is solemnised under Special Marriage Act, 1954 (including their issues).
However if both the spouses are Hindus, Buddhist, Sikh and Jains even though their marriage is solemnised under Special Marriage Act, 1954 shall be governed by Hindu Succession Act. It may be noted that these provisions shall apply only to the person whose marriage is solemnised under Chapter II of the Special Marriage Act and not to the spouses who are already married and thereafter get their marriage registered under Chapter III of the Special Marriage Act.
Hindu Succession Act makes a distinction between Male & Female for deciding the manner of distribution of their estates. Heirs are defined as Class I, Class II, Agnates and Cognates for the Hindu male. Devolution of the property of Hindu male dying intestate is governed by section 8 and that of distribution of property of Hindu female dying intestate is governed by the Sections 15 & 16 of the Hindu Succession Act, 1956.
Property of the Hindu male devolves upon his widow/s, children (including heirs of a predeceased child through such child) and mother in equal share (Class I). In case none of them are present, the property Will pass to Class II heirs. Class II heirs are divided into nine categories consisting of father if he is alive and failing which to his son’s/daughter’s children, brother, sister and other relative specified in schedule. In case none of Class II heirs are present then the property shall devolve to agnates (person is said to be agnate of another if the two are related by blood or adoption wholly through males) and then to cognates (person is said to be cognate of the another if the two are related by blood or adoption but not wholly through males). Brothers & sisters under Class II shall not include brother/sister by uterine blood. However in absence of Class I heirs’ uterine brother is entitled to succeed to the estate of deceased bachelor.
Illegitimate children cannot be included within the meaning of the words sons & daughters as used in the list of Class I heirs. When a man marries second time during lifetime of his first wife, children from both wives would be entitled to share the retiral benefits after his death. The second marriage being void, his second wife would not be entitled to the retiral and pensionary benefits. The first wife would be entitled to gratuity, provident fund, family pension and other benefits. With the deletion of section 24 remarried women (widow of predeceased son, widow of predeceased son of a predeceased son) can succeed to the estate of Hindu dying intestate. A Hindu who has converted himself to Muslim is not entitled to inherit the property of a Hindu under Hindu Succession Act. A step-mother is not entitled to get property of her son or her daughter; however she can be an heir as father’s widow under Entry VI of Class II.
When a Hindu dies, after the commencement of the Hindu Succession (Amendment) Act, 2005 his interest in the joint family properties governed by the Mitakshara law, shall devolve by testamentary or intestate succession and not by survivorship. The interest of a Hindu Mitakshara coparcener shall deemed to be share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death, whether or not he was entitled to claim partition.
• Further his coparcenary/joint property shall be deemed to have been as if partition had taken place.
• The daughter is allotted the same share (assets/liability) as is allotted to a son.
• The child of the predeceased son/daughter or grandchild of the pre deceased son/daughter shall be entitled for the share of predeceased son/daughter.
Whereas property of Hindu female shall devolve upon her husband and children (including heirs of a predeceased child through such child) in equal share. In case none of them are present, property Will pass to the heirs of her husband and failing which to her mother and father and later on to the heirs of the father and lastly to the heirs of mother. However any property inherited by female Hindu from her father/mother shall, in absence of her children (including grand children) devolve upon heirs of father and any property inherited from her husband or her father in law shall, in absence of her children (including grand children) devolve upon heirs of the husband.
Husband Will not be entitled to succeed to the property left by his wife, if she has acquired the said property from her father. Accordingly issueless female Hindu’s property (property acquired from her father/mother) shall devolve on the heirs of her father. However property earned by a woman exclusively is Stridhan and Will devolve upon her heirs. In other words where property was inherited by a lady from her parent(s), it shall not pass to her husband or to her husband’s heir where she dies without children or children of predeceased children. Any property possessed by a female Hindu shall be held by her as full owner thereof and not as a limited owner (Sec. 14). Illegitimate daughter cannot claim heirship as per section 15 of the Act. Further ‘step son’ and ‘step daughter’ are not included in the term ‘son’ or ‘daughter’ in section 15(1) and accordingly are not entitled to share in property.
By the 2005 Amendment Act, four categories of heirs which were hitherto placed in Class II were elevated to Class I heirs namely (i) Daughter’s son’s son, (ii) Daughter’s daughter’s daughter; (iii) Daughter’s son’s daughter; and (iv) Son’s daughter’s daughter. While adding these categories to Class I, the corresponding entries in Class II were not deleted. Thus there is overlapping between Class I and Class II schedule.
The Law Commission of India in its 204th Report on the Hindu Succession Act, 1956 has suggested to the Government that that father should be placed along with mother in Class I and both together should take one share. The Commission has also suggested revision of Class I heirs as in the opinion of the Commission, Class I heirs list in the Schedule is complex and cumbersome and is not amenable to easy understanding.
Person dying intestate
If person dies without making a ‘Will’, he is said to have died intestate and in such case his property Will be inherited by his heirs in accordance with law of succession as discussed above and in case a person dies leaving behind Will his property shall be distributed as per the terms of ‘Will’ which is know as Testamentary Succession. In other words Testamentary Succession means succession to a property of the deceased in accordance with the provisions in the last Will and Codicil of the deceased.
A Mohammedan can, by ‘Will’, dispose of not more than 1/3rd of his estate after payments of debts and balance 2/3rd of property devolves according to the applicable Shariat Law. However testator may bequest more than 1/3rd of his property provided heirs consent to such bequest only AFTER Testators death. If the testator has no heirs, he may bequest the whole of his property to stranger. In matters of Succession and inheritance, Hindu Law governs a Khoja.
‘Will’ means a legal declaration of the intention of a testator with respect to his property, which he desires to be carried into effect after his death — Section 2(h) of Indian Succession Act, 1925. ‘Will’ as including Codicil and every writing making a voluntary posthumous disposition of property — Section 3(64) of General Clauses Act, 1987.
‘Codicil’ means an instrument made in relation to Will and explaining, altering or adding to its dispositions and is deemed to form part of the Will — Section 2(d) of Indian Succession Act, 1925.
Essential Characteristics of Will are:
(a) The document must be in accordance with the requirements laid down under section 63 of Indian Succession Act, 1925; i.e., executed by a person competent to make Will and attested as required under the Act.
(b) The declaration should relate to the properties of the testator, which he wishes to bequeath.
(c) The declaration must be to the effect that it operates after the death of Testator and is revocable during his life time.
(d) After the Indian Succession Act, 1925, Wills (except made by Mohammedans) should be made in writing.
Types of Wills
Under the Indian Succession Act, Will can be Privileged Will or Unprivileged Will.
Any soldier being employed in an expedition or engaged in
actual warfare, or an airman so employed or engaged, or any mariner being at
sea, may, if he has completed the age of eighteen years, dispose of his property
by a Wills made in the manner provided in Section 66. Such Wills are called
privileged Wills. Privileged Wills may be made orally and may not always be in
writing. If written in handwriting of testator, it may not be signed or
attested. It is governed by sections 65
Wills made by the persons other than stated above are Unprivileged Will. Such Wills are required to be in writing, signed by testator and attested by the two witnesses (except those made by Mohammedans). It is governed by section 63.
Will can be made by
Every person of sound mind, not being minor may dispose of his property by Will. As a general rule, until, the contrary is established, a testator is presumed to be sane and to have a mental capacity to make valid Will. However no person can make Will while he is in a state of mind arising from intoxication or from illness or from any other cause such that he does not know what he is doing — (Sec. 59 Indian Succession Act). Even persons who are deaf or dumb or blind can make Will provided they are aware what they do. Further person who is ordinarily insane, may make his Will during the interval in which he is of sound mind.
: The name and description like age, religion, community etc. of the testator.
2. Revocation of earlier Wills: A declaration that the present Will is his last Will and testament and that he revokes all other earlier Wills, codicils.
3. Appointment of Executors: An executor is a person named by the testator in the Will to whom the testator has confided the execution of Will. If legacy or bequest is given to executor it should be mentioned in the Will that he would be entitled to legacy even if he does not accept to act as the executor of the Will unless there is any contrary intention.
4. Direction to pay dues if any
5. Legacies and Bequest: This is important clause in the Will, because under these clauses the testator makes the disposition of his property. He can make requests to future person also.
6. Residue clause: It is always advisable to have Residue Clause disposing of the residue (i.e., remaining property belonging to the testator at the time of the death which is not specifically disposed) of the testator’s property. If there is no residue clause such remaining property Will go to the legal heir of the testator. Even the legacy which lapse go back to intestacy if there is no residue clause.
7. Testimonium Clause: The testimonium clause is as "in witness whereOF I said _______ have hereunto set and subscribed my hand at ______ on this __ day of ______ 20__."
8. Execution Clause: This is the last clause of the Will which begins with "Signed and acknowledged by the within named Testator as his last Will and Testament". The Testator should sign the execution clause in the presence of two witnesses who should also subscribe their signatures as witness in the presence of the Testator. The witness and/or his spouse cannot be made beneficiary under the Will as any bequest in their favour would be void. However validity of the Will and all other bequests made under it continue to remain valid. In such a case the indisposed portion of the bequeathed property shall devolve as per the law of inheritance. These provisions are not applicable to Hindu, Sikh, Jain or Buddhist. It is preferable to have a doctor to certify that testator is of sound mind and under no influence of alcohol when he made the Will.
Other Important points
1. Preparation of a Will does not require any specific legal language.
2. Will need not be stamped.
3. Registration of Will is not mandatory. However a registered Will has certain advantages.
4. A Will can be revoked at any time by the testator during his life time.
5. A Will stands revoked by marriage of the maker Sec. 69. However this rule does not apply to Hindus, Buddhists, Sikhs, Jains or Mohammedans Sec. 57.
6. Either the Hindu Succession Act or the Indian Succession Act does not put any embargo on the power and authority of the executants that a Will cannot be executed in the favour of a person who is professing another religion.
7. It is important to note that the attesting witnesses need not know the content of the Will.
8. No alternation made in a Will after the execution shall have any effect, unless such alternation has been executed in the same manner as a Will and attested by two attesting witnesses Sec. 71.
9. In respect to construction of Wills, the law is well settled that intention of the testator has to be ascertained from the words used in the Will, keeping in view the surrounding circumstances, the position of the testator and his family relationship and that the Will must be read as whole.
10. No man having a nephew or niece or any nearer relative shall have power to bequeath any property to religious or charitable uses, except by a Will executed not less than twelve months before his death, and deposited within six months from its execution in some place provided by law for the safe custody of the Wills of living persons. However it is not applicable to Hindus, Buddhists, Sikhs, Jains & Parsis.
11. Any testator may, either personally or by duly authorized agent deposit with any Registrar his Will in a sealed cover superscribed with the name of the testator and that of his agent (if any) and with a statement of the nature of the document as per Section 42 of Registration Act, 1908.
12. The testator, or after his death any person claiming as executor or otherwise under a Will, may present it to any Registrar or Sub-Registrar for registration under section 40.
Probate is a certificate granted under the seal of Competent Court, certifying the Will (a copy whereof is annexure thereto) as the Will of the testator and granting the administration of the estate of the deceased in accordance with that Will to the executor named under the Will. No right as executor or legatee can be established in any Court of justice, unless a court of competent jurisdiction has granted probate of the Will under which the right is claimed, or has granted letters or administration with the Will or with the copy of an authenticated copy of the Will annexed.
As per Section 213 of Indian Succession Act, Probate is not necessary in the case of WillS made by Mohammadans, However probate is necessary:
(a) To all Wills codicils made by any Hindu, Buddhist, Sikh or Jain, on or after 1-9-1870, within the territories of the Lieutenant-Governor of Bengal or within the local limits of the ordinary original civil jurisdiction of the High Courts of Judicature at Madras and Bombay (Section 57);
(b) To all such Wills and codicils made outside those territories and limits so far as they relate to immovable property situate within those territories or limits (Section 57);
(c) In the case of Wills made by any Parsi dying, after the commencement of Indian Succession (Amendment) Act, 1962, where such Wills are made within the local limits of the ordinary original civil Jurisdiction of the High Courts at Calcutta, Madras and Bombay, and where such Wills are made outside those limits, in respect of immovable property situated within those limits.
(d) Wills of Christians dying after 27-5-2002 made within the territories mentioned in (a) above.
Letters of Administration
A letter of administration can be obtained from the Court of competent jurisdiction in cases where the testator has failed to appoint an executor under a Will or where the executor appointed under a Will refuses to act or where he has died before or after proving the Will but before administration of the estate. Letters of Administration are not always necessary in cases of intestacy of Hindus, Mohammedans, Buddhists, Sikhs, Jains, Indian Christians or Parsis. Letter of Administration are always necessary where a person (governed by the Indian Succession Act) dies intestate.
In case, where grant of Probate or Letters of Administration is not compulsory, Succession Certificate can be granted by the Court with respect to any ‘debt’ or ‘security’ to which a right is required to be established by Letters of Administration or Probate and for this purpose ‘security’ means Government Securities, shares, stocks and debentures in companies and incorporated institutions, debentures or securities issued by or on behalf of local authorities and any other security which the State Government may notify.
Court fees on application of Probate and Letters of Administration
Court fees are payable in the slab manner (In the State of Maharashtra) as under:
Value of property in the application Rate
A maximum Court fees payable in the State of Maharashtra is Rs. 75,000 for obtaining a probate. No court fees was payable in case the Will is administered by the Woman Executor; i.e., executrix up to 23-3-2000. Court fees are payable only in respect of such assets of the estate as were at the time of death of the testator locally within the jurisdiction of the authority which grant probate.
Will vis-à-vis Nomination
The nomination continues only till the Will is executed. Once the Will is executed, the Will takes precedence over the nomination. Nomination does not confer any permanent right upon the nominee, nor does it create any legal right in his favour. In other words generally nominee is for all purposes a trustee for the property. However the provisions of law, under which nomination is made need to considered carefully to understand whether nomination would prevail or not.
In order to achieve your objective and have a happy ending best time to start planning as soon as possible. It’s better to act now, since life is full of uncertainties and no one has a second chance. Further more, in absence of social benefits in India, estate planning is important. Role of advisors is crucial who can guide to achieve objective considering the applicable laws with optimised costs.