Estate Planning for CFP – 2

Intestate Succession:

• A person who dies without making a Will is known as intestate
• A heir is a person entitled to inherit property after death of the intestate

Succession Acts:

• For Hindus, Buddhists, Jains and Sikhs the laws of inheritance have been codified in the Hindu Succession Act, 1956
• For Christians the Indian Succession Act, 1925 will be applicable
• Parsis and Muslims have a different law of inheritance
• It extends to the whole of India except the State of Jammu and Kashmir
• The law of intestate succession is concerned with matters as to who are the heirs, what are the rules of preference among the various relations, in what manner is the property distributed in case where there is more than one heir and so on.

Heirs of a Hindu Male:

1. Class I heirs
2. Class II heirs
3. Agnates
4. Cognates, and
5. Government

General rules of succession in the case of males

• (a) firstly, upon the heirs, being the relatives specified in class I of the Schedule;
• (b) secondly, if there is no heir of class I, then upon the heirs, being the relatives specified in class II of the Schedule;
• (c) thirdly, if there is no heir of any of the two classes, then upon the agnates of the deceased; and
• (d) lastly, if there is no agnate, then upon the cognates of the deceased.

Distribution of property among heirs in class I of the Schedule

• Rule 1-The intestate’s widow, or if there are more widows than one, all the widows together, shall take one share.
• Rule 2-The surviving sons and daughters and the mother of the intestate shall each take one share.
• Rule 3-The heirs in the branch of each pre-deceased son or each pre-deceased daughter of the intestate shall take between them one share.
• Rule 4-The distribution of the share referred to in Rule 3:
  • (i) among the heirs in the branch of the pre-deceased son shall be so made that his widow (or widows together) and the surviving sons and daughters get equal portions; and the branch of his predeceased sons gets the same portion;
  • (ii) among the heirs in the branch of the pre-deceased daughter shall be so made that the surviving sons and daughters get equal portions.

Distribution of property among heirs in class II of the Schedule

The property of an intestate shall be divided between the heirs specified in any one entry in class II of the Schedule so that they share equally.

Agnates and Cognates:

Next heir of Hindu male is ‘Agnates and Cognates’. In it first preference is given to ‘Agnates’ & then ‘Cognates’. The rules for determining who are
agnates & cognates are the same; so are the rules relating to distribution of property among them.

Agnates mean when a person traces his relationship with another through males.

Cognates means whenever in the relationship of a person with another, a female (or more than one female).

List of Class I Heirs

• i. Mother
• ii. Widow
• iii. Daughter
• iv. Son
• v. Widow of a predeceased son
• vi. Son of a predeceased son
• vii. Daughter of a predeceased son
• viii. Widow of a predeceased son of a predeceased son
• ix. Daughter of a predeceased son of a predeceased son
• x. Son of a predeceased son of a predeceased son
• xi. Daughter of a predeceased daughter,
• xii. Son of a predeceased daughter.

New heirs are added by Hindu Succession (Amendment) Act, 2005.

• i. Son of a predeceased daughter of a predeceased daughter
• ii. Daughter of a predeceased daughter of a predeceased daughter
• iii. Daughter of a predeceased son of a predeceased daughter
• iv. Daughter of a predeceased daughter of a predeceased son

Class II Heirs

Category – I

• Father

Category – II

• (1)Son’s daughter’s son,
• (2)Son’s daughter’s daughter,
• (3) brother,
• (4) sister.

Category – III

• (1) Daughter’s son’s son,
• (2) daughter’s son’s daughter,
• (3) daughter’s daughter’s son,
• (4) daughter’s daughter’s daughter.

Category -IV

• (1) Brother’s son,
• (2) sister’s son,
• (3) brother’s daughter,
• (4) sister’s daughter.

Category -V

• Father’s father; father’s mother.

Category -VI

• Father’s widow; brother’s widow.

Category -VII

• Father’s brother; father’s sister.

Category -VIII

• Mother’s father; mother’s mother

Category -IX

• Mother’s brother; mother’s sister.

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Estate Planning for CFP – 1

What is Estate Planning?

Estate Planning is a process of arranging and planning a person’s succession and financial affairs. The primary goal of estate planning is ensuring that the estate of the individual passes to the estate owner’s intended beneficiaries.

Importance of Estate Planning:

1. Harmonious and planned succession and disposition of the estate which helps ensure that your money and other assets go to the people you choose
2. Efficient management and accumulation during and after life
3. To take care of unforeseen eventualities by providing for who will care for your minor children if you become unable to
4. Defusing potential conflicts over the distribution of your assets

In the real world you may seldom find the families those who have no issues related to the estate. Estate planning is indeed a need of the day. It is the core responsibility of the planner to make the client aware about the importance and ease of process for estate planning. You may also observe that people talk a lot about estate, think even more for the ways of disposing it but do nothing to avoid probable conflicts among the loved family members.

Means of Estate Planning – Will

A will is a legal document that states how your assets will be distributed after your death as per your wishes. There Often arises problems and complications when a person dies without a Will. A Will  is defined as “the legal declaration of the intention of the testator, with respect to his property, which he desires to be carried into effect after his death.”

Characteristics of  Will:

1. Legal Declaration: The documents intending to be a Will or a testament must be legal, i.e. in conformity with the law and must be executed by a person legally competent to make it
2. Disposition of Property: The declaration should relate to disposition of the property of the person making the Will
3. Death of the Testator: The declaration as regards the disposal of the property must be intended to take effect after his death
4. Revocability:The essence of every Will is that it is revocable during the lifetime of the testator. People capable of making Wills are, Every person who is:
   1. not a minor
   2. of sound mind
   3. free from fraud, coercion or undue influence

Types of Will

Important terms:

Testator: A person who makes the will

Testament: A legal document declaring a person’s wishes regarding the disposal of their property when they die

Codicil: According to Indian Succession Act, Section 2(b) Codicil is an instrument made in relation to a Will and explaining, altering or adding to its dispositions and shall be deemed to form part of the will

Probate: A probate means a copy of the will, given to the executor, certified under the seal of the competent court and signed by one of the registrar, certifying that the Will has been proved