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Non Life Insurance - How you can protect your family’s interests in these uncertain times

07 Aug 2020

NSamant, 37, found out the hard way that being his father’s only legal heir was not enough to ensure smooth inheritance of his assets. The Bengaluru-based marketing manager lost his father to a sudden illness four years ago, but the legal battle that ensued between him and one of his paternal uncles over the ownership of a piece of land is still ongoing. “My father didn’t make a will, so I had to go to a magistrate and get a legal heirship certificate. By the time I got it, my uncle had already contested my claim to the property, since it was a shared plot," he said.

As news of acquaintances and relatives falling gravely ill or passing away due to covid-19 trickles in, the stark reality has emerged: there is a need to be prepared for the worst for yourself as well as your loved ones. Estate planning, which can ensure smooth inheritance, is one aspect of financial planning that is often ignored due to the taboos surrounding death. But putting it on the back-burner can mean trouble for your loved ones, like in the case of Samant.

“As per data from Press Information Bureau, in 2016, 76% of all cases pending in Indian courts were related to family and property disputes. Most of them could probably have been avoided with proper succession planning," said Raj K Lakhotia, founder, dilsewill.com, an online estate and succession planning platform.

So if you haven’t done it already, put in place a succession plan now.

Your family needs it

Estate planning is meant to smoothen things out for your family and loved ones after you are no more. Making a will is the most common mode to put estate planning in motion.

“In the absence of a will, the estate of the deceased person will flow under intestate succession law, which varies significantly by religion and gender. For instance, for Hindu males dying without a will, one of the major problems is that all heirs are entitled to joint and equal ownership to all assets, which includes their widow as well as all sons and daughters," said Rishabh Shroff, partner, Cyril Amarchand Mangaldas. This means each heir gets equal ownership in each asset, which can lead to disputes and complications if one of them wants to sell or transfer their share, as they have to seek the consent of all others. Then there are stamp duty, taxation and other factors to deal with.

“In many family disputes, when a patriarch dies without a will, the children fight for ownership of the assets and cause the entire estate to get stuck in court," Shroff added.

A will can have many utilities beyond distributing your assets. “It can name a guardian for your children if you pass away before they reach adulthood; and leave specific instructions like arrangements for your funeral, organ donation, and a lot more," said Lakhotia.

No right age to do it

People often view retirement or death as a faraway probability and feel it’s not yet time to make a will. Some even feel they don’t have enough assets to make a will. But there’s no right or wrong age to do so.

Gauri Shankar Jhawar, 72, a Kolkata-based business owner, saw many of his relatives struggle with inheritance as there was no will in place. “There were disputes between kin, brothers and sisters, and the litigations depleted half the value of the property," he said. Taking a lesson, Jhawar sought professional help to draft his own will. Though he realised the importance late in life, he has advised his son, 44, to make a will as early as possible.

Writing a will

Many assume that a will has to be registered for it to be valid, but that’s not true. “However, elderly clients, who are likely to have their wills challenged on grounds of mental infirmity or testamentary capacity, or clients who fear an attack on their estate from disgruntled family members, should register wills," said Shroff.

The essential condition is that it must be in writing and the testator or the maker of the will should sign it in the presence of two witnesses (who are not beneficiaries). The witnesses must also sign the document. “A will has to be in the language known and understood by the testator. If it is written in a different language, the testator needs to mention that assistance of a friend or relation was taken to read and understand the contents of the will," said Rajat Dutta, founder and initiator, Inheritance Needs Services, adding that the friend or relation in question can’t be a beneficiary.

You will also need to appoint an executor to oversee your estate’s distribution in line with your wishes.

Do take into account the succession laws applicable. For instance, if you are a Hindu, you can only bequeath an asset according to your wishes if it is self-acquired, whereas succession rules will apply for ancestral property or assets.

Remember that you can alter a will as many times as you want. “It is recommended that the will be revisited every three to five years due to changes in financial status, relationship status, and others," said Lakohtia. But it is a good idea to mention that it is the last will of the testator and any previous versions or codicils (amendments made to the earlier will) are invalid. “It is prudent to refer to previous wills and codicils in the last or current will. But even if it is not, the last will would be considered valid unless proved to be made under suspicious circumstances. Even if the last will is unregistered, it will supersede an earlier registered will," said Dutta.

Keep your register of assets updated and your heirs in the loop. “An asset register is essentially a listing of all assets that you own directly or indirectly. The details listed are the nature of assets (bank accounts, mutual fund or stock investments, real estate, gold, among others)," said Anirudha Taparia, executive director, IIFL Wealth and Asset Management.

Not only does having all your assets listed in one place, complete with all the details like where it is held, who the nominees are, whether it has a single holder or multiple, whether it is self-acquired or inherited, helps you get a clear picture when you’re drawing up a will, it also helps the executor in the distribution process.

While the idea of one’s own mortality can be difficult to grapple with, in these uncertain times it is more important than ever to secure the interests of your loved ones.