The most ignored, yet important, facet of wealth management is estate planning. Wealth management is far beyond only wealth creation. It also involves protection, preservation and succession of one’s possessions. Organizing your family’s financial affairs is important. If you were to become incapacitated or die, planning ahead can make sure your estate is disposed of in accordance with your wishes, and help avoid legal complications.
Main component of estate planning is designating assets, whether it’s your ancestral agricultural or residential land or your own house or even a stock portfolio. Without an estate plan, the courts will often decide who gets your assets, a process that can take years and can get ugly.
Estate planning is all about protecting your loved ones, which means in part giving them protection from big tax hits. Essential to estate planning is transferring assets to your loved ones with an eye toward creating the smallest tax burden for them as possible.
Some of the key components of estate planning are following:- Will, Power of Attorney, Nomination in investments.
A Will and Testament is a written document of your desire for distribution of your wealth to the loved ones. You can change your Will as many times as you want. Without a valid Will, the distribution of your assets will not be according to your wishes, but as per the law of the land
A Power of Attorney for general or business purpose will designate someone to act for you in case you are incapacitated and unable to make decisions for yourself.
Another important aspect of planning is Nomination. A lot of us overlook nomination details in most of investment ventures as just another formality. One reason for this is that it is not compulsory. However, proper nomination is important to ensure that your loved one’s do not face legal issues.
Increased purchasing powers, rise in life expectancy and related concerns about outliving retirement are primary factors to be considered while estate planning.
Still, only a small minority of people are looking at this side of planning and are being careful for later stage. This helps them in avoiding property disputes and many other headaches for the future.
A study conducted by a Bengaluru-based non-government organization (NGO) has shown that a judge in a high court spends less than five minutes hearing a case, on an average. A whopping 2.8 crore cases are pending in district courts across the country. There are 1696 cases pending per judge in India. It is an alarming scenario.
Who can forget spat over property between retired business tycoon Vijaypat Singhania, his son Gautam, and his nephews. It has been a long drawn legal battle & still going on for last 5 years. It has left bitterness among close family members. These things clearly show that one need to address these small yet significant things to ensure that you or your loved ones don’t have to see the steps of the courthouse.
One of the most general reason for family disputes in India as in the rest of the world is weak estate planning. Estate planning is a neglected topic in India mainly because of the emotions attached to it. People generally avoid committing themselves to estate planning in their younger years purely out of ignorance and misbelief that it is meant for older people. This attitude exposes their families to vagaries of life.
It is noteworthy that more & more younger people are now subscribing to Term Assurance. Therefore, it can be safely assumed that they are aware of the risk of death. Why they avoid estate planning is a mystery.
WHY IT MATTERS:
Estate planning is for everybody, not just for the wealthy. Without an appropriate estate plan, friends and relatives can spend a lifetime (and their life savings) battling over your assets. It can be intimidating, but it is a necessary step in ensuring your assets end up where you want them, without any interference.
Despite the clear legal benefits, the tendency persists of ignoring or deferring estate planning. One’s haziness about how to go about it renders it even more important to place the responsibility for estate planning in skilled hands, which could then give it the attention and consideration it deserves.