Estate Planning involves drawing up a flow chart in advance through which devolution of movable and immovable property of an individual can take place as a legacy. Estate Planning involves drawing up of Will, Family Settlement and Power of Attorney, Discretionary Family Trust.
# Wills and Indian Succession Act, 1925
The ancient Hindu Law did not contemplate Wills nor the strict formalities necessary for the same. The present law is really on adaptation of the English Common Law and statute law to Indian conditions and the substantial part of it found in the Indian Succession Act, 1925. However, the Indian Succession Act does not apply in its entirety to all Indians and major part of it does not apply to Hindus, Buddhists, Sikhs or Jains, resulting in some confusion at times as to the provisions applicable in any instant case. Most of the provisions do not apply to Muslims. It will be useful to recapitulate and analyse the important provisions relating to Wills contained in the Indian Succession Act, 1925. There is no enactment dealing with inter vivos family settlements and, therefore, they would be governed by the general law.
Definition of “Will in section 2(h) of the Act is as follows :- ‘(h) “Will” means legal declaration of a testator with respect to his property which he desires to be carried into effect after his death.
# Essential characteristics of a Will are :-
A Will need not comprise the entire property of the testator but may be limited to a part or portion of it. Similarly, there can possibly be several Wills legally executed by a testator each dealing with separate and different properties. A mere expression of desire about disposal of property or its use may not amount to a valid bequest under a Will. A bequest under a Will must be couched in a language which not merely expresses a hope or desire but must dispose of the property after the death or direct its disposal in a particular manner after death.
# Several Kinds of Wills are –
As per Indian Registration Act Registration of Will is optional and is for the purpose of ensuring the safe custody of the Will and to facilitate the proof of the execution of the Will respectively.
# Discretionary Trust by Will
Discretionary trust by Will is the most commonly utilized mode of Tax Planning by reason of the second exception to section 164 of the Income-Tax Act, Section 164 and the corresponding provision of the Wealth-Tax Act contained in section 21 provide that where income or wealth is receivable under a trust declared by Will the maximum marginal rate is not applicable and only the appropriate rate will be attracted on the income or wealth on such a discretionary trust both as regards income and wealth left by a testator to a group of legatees. The requirement of the law is, therefore, satisfied when a trust is declared by a Will and the income or wealth is receivable under such a trust and such income or wealth is not specifically receivable on behalf of any one person or individual shares therein are indeterminate or unknown. If these requirements are satisfied, then discretionary trusts created by Will will be taxable as a separate unit of assessment under section 164 qua income and section 21(4) qua wealth and neither the income nor wealth will be includible in the assessment of the beneficiaries.
# Family Settlement
Halsbury’s Laws of England, Volume 18 Fourth Edition, deals with this subject at length
Para 301 defines a family arrangement as follows :-
“ A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed right or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour”. “The agreement may be implied from a long course of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term family agreement is applied”
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