Estate planning

What happens if you do nothing

If you die without a valid will, your assets do not go where you would have chosen. They go where the applicable succession law directs.

Which law applies depends on your religion and personal law. The Hindu Succession Act, 1956 governs Hindus, Buddhists, Jains and Sikhs, and since its 2005 amendment daughters have the same coparcenary rights in ancestral property as sons. The Indian Succession Act, 1925 governs Christians and Parsis, and applies to the wills of most communities. Muslim succession follows personal law, under which testamentary freedom is limited in defined ways. Special rules apply to interfaith marriages solemnised under the Special Marriage Act.

The result of intestacy is rarely what the person would have wanted, and the process of establishing entitlement without a will is slow, expensive and frequently divisive at a moment when families are least able to absorb it. A will is the single highest-value document in most people’s financial affairs, and the one most often postponed.

The nomination misunderstanding

This is the most common and most consequential error in Indian estate planning: believing that because a nominee is recorded, the asset is settled.

For most asset classes, a nomination determines who the institution may lawfully pay, so the money is released quickly without a succession certificate. It does not, by itself, determine who is ultimately entitled to keep it. Courts have repeatedly held that a nominee in such cases receives the funds to hold for the legal heirs, and the estate is distributed according to the will or, absent one, the applicable succession law.

There are exceptions, and they matter. A beneficial nominee under the insurance framework has stronger standing. The position for shares and certain other assets has been the subject of litigation and differs. And a gift or a specific bequest in a will can direct an asset regardless of the nomination.

The practical rule is simple: keep nominations current for speed of access, and keep a will for entitlement. Where the two conflict, you have created exactly the dispute you were trying to avoid, so review them together.

Making a will properly

• The essentials: a person of sound mind, signing with the intention that the document be their will, attested by two witnesses who see the signature and who are not beneficiaries or spouses of beneficiaries.
• Registration is optional in most cases and is often worth doing anyway, because it makes the document harder to dispute and easier to locate.
• Probate — formal proof of a will by a court — is required in certain jurisdictions and circumstances. Where it is required, having a clear, properly attested will materially shortens the process.
• Name a residuary beneficiary so that assets acquired after the will was made, or not specifically mentioned, still pass as you intend.
• Review it after life events — marriage, divorce, a birth, a death, a significant asset purchase or sale. A will made fifteen years ago may distribute assets you no longer own to people whose circumstances have changed.
• Tell someone where it is. A will nobody can find achieves nothing.

The asset register

Separately from the will, the most useful thing you can leave is a list: bank accounts, mutual fund folios, demat accounts, insurance policies, deposits, property, loans outstanding, and digital assets and how to access them. Families routinely discover assets years late, or never.

Keep it current, keep it somewhere your executor can reach, and include contact details for your chartered accountant, lawyer and distributor. Our financial data sheet is designed for exactly this purpose, and our statements and KYC page has the links for consolidating mutual fund holdings.

Where it gets more involved

A minor or dependent beneficiary generally needs a structure rather than a direct bequest, so that assets are managed until they can be handled. A private trust is the usual instrument, and it is a matter for a lawyer.

A business raises succession questions a will alone does not answer — who runs it, who owns it, and how a departing family member is bought out. Buy-sell arrangements funded by insurance are one common mechanism.

Creditor exposure. For business owners who have given personal guarantees, an insurance policy endorsed under the Married Women’s Property Act ring-fences proceeds for a spouse and children beyond the reach of creditors. See term insurance.

Incapacity, not only death. A power of attorney for financial matters, and clarity about medical decisions, addresses a scenario a will does not cover at all.

Taking it further

Drafting a will and setting up trusts are legal matters and belong with a qualified lawyer. For the financial side — what you hold, how it is titled, what your family would actually receive — consider a SEBI-registered Investment Adviser. Start by building the asset register; it is useful immediately and makes every subsequent conversation shorter.

Frequently asked questions