Securing Your Legacy: Essential Steps for Estate Planning in India

Estate planning is an essential aspect of financial management that allows individuals to protect and distribute their assets according to their wishes while minimising legal complexities and tax burdens. A well-crafted estate plan is essential in India, where family structures and legal frameworks are diverse. Below are the essential steps to consider when undertaking estate planning in India.

Benefits of Having a Corporate Financial Consultant

Step 1 : Identify Your Goals and Objectives : The first step in estate planning is clearly defining your goals and objectives. This involves assessing your financial situation, determining your intended beneficiaries, and considering how you want your assets to be distributed. It is crucial to think about your family's future needs, philanthropic desires, and any specific concerns you may have regarding asset protection or tax planning.

Step 2 : Create a Will : Vehicle loan is a medium term product to finance the purchase of a vehicle e.g. two wheeler, four wheeler etc. You have to make minimum down payment (percentage of the vehicle price) and the lender will provide rest of the funds. You have to make loan re-payments in equal monthly instalments (EMI). In vehicle loan, the vehicle will be lien with the lender.

Step 3 : Appoint Executors and Trustees : Designating responsible executors and trustees is a critical step in estate planning. Executors are individuals responsible for managing the administration of your estate, while trustees handle assets held in trust for beneficiaries. Carefully select trustworthy individuals who will act by your wishes and have the necessary skills to carry out their responsibilities effectively.

Step 4 : Consider Trusts for Asset Protection : Trusts are legal arrangements that allow you to transfer assets to designated beneficiaries while providing protection and control over those assets. Setting up a trust can help minimise estate taxes, protect assets from creditors, and ensure that assets are managed and distributed per your instructions. Consult an estate planning attorney to determine the most suitable trust structures for your needs.

Step 5 : Review and Update Beneficiary Designations : Review and update beneficiary designations on financial accounts, insurance policies, retirement plans, and other assets. These designations often supersede instructions in a will, so ensuring they align with your current intentions is crucial. Regularly review and update these designations as life circumstances change, such as marriage, divorce, births, or deaths in the family.

Step 6 : Plan for Incapacity : Estate planning involves preparing for potential incapacity, which may occur due to illness or accidents. Consider executing documents such as a power of attorney and a living will. A power of attorney appoints someone you trust to manage your financial and legal affairs if you cannot do so. At the same time, a living will outline your medical preferences and end-of-life decisions.

Step 7 : Consider Tax Implications : Understand the tax implications of your estate plan and explore strategies to minimise tax liabilities. Also, with continuous changes and updates in the Indian tax laws, it is essential to consult with a well-versed tax professional in estate planning to ensure compliance and take advantage of available tax-saving provisions.

Step 8 : Communicate and Document Your Plan : This is very similar to loan against shares. You can get a loan by pledging your mutual fund units. The mutual fund schemes should be part of the lenders list of approved schemes. The loan amount to be disbursed is calculated as percentage of the NAV of the mutual fund units. Different percentages are applicable for equity and debt mutual fund schemes. You do not need to have a demat account to take loan against mutual funds. The Registrar and Transfer Agent (RTA) will mark lien against the mutual fund units pledged by you. Once you repay the loan, the lien will be removed from the mutual funds.