Estate Planning: Wills V. Trust – What is right for you?

Introduction

Estate Planning, as the term suggests, refers to the process wherein the assets and liabilities of an individual are arranged in order of preference so that upon the death or incapacity of the individual, they can duly be distributed or liquidated by the legal heir. There are various methods of planning one’s estate out of which wills and trust are the most common. This article discusses both the modes of estate planning especially wills in India and details a comparative analysis in order to make an informed and planned decision.

Wills in India

Wills in simple terms may be defined as a legal instrument which outlines the procedure in which the assets of the deceased individual may be divided at the time of death or incapacity to either the legal heir or nominated beneficiaries. In order to avoid ambiguities, a will must contain the name and personal details of the testator and the executor, details of the assets to be devolved and share to be devolved upon each beneficiary. The concepts of Wills in India are governed by the Indian Succession Act and the Hindu Succession Act which lay down various essentials that need to be fulfilled for a will to be successfully registered that are as follows:

1. An individual intending to prepare a will must be of sound mind and capacity i.e., he/she must not be a lunatic or minor. An individual under the influence of any intoxication cannot also prepare a will.
2. The will must be in writing, either typewritten or handwritten. Oral declaration of will is not provided under the provisions of the Indian Succession Act 1925.
3. The testator must also affix his/her signature in front of at least two witnesses. The witnesses are also required to sign the document along with providing the declaration that they believe the testator to be of sound mind and have seen him/her sign the document in their presence. Therefore, the beneficiaries cannot be allowed to act as a witness in the will.
4. The verbatim of the will must be clear and unambiguous to avoid any complications arising out of the division of assets.

There are numerous conditions attached with creating a will in India which include no limit upon the number of times that a testator can devise a will. Secondly, A Will, obtained by force, coercion or undue influence , is a void Will as it takes away the free agency of the person. A Will, made under influence of intoxication or in such a state of body or mind, sufficient to take away free agency of the testator, is void. Though the registration of a will is not mandatory according to the Indian legal system, the same can be registered with the sub – registrar of wills having jurisdiction to register it.

Trusts in India

A trust refers to an arrangement for transfer of property whereby the owner of the property transfers the rights of the property to be held by an individual solely for the benefit of the beneficiaries specified in the owner. The process of formation of trusts in India is governed by the Indian Trusts Act 1882 and for a valid trust to be created, registration of the trust with competent authorities is mandatory.

In order to create a trust for estate planning in india, firstly the trustees need to be identified for whose benefit the trust is created. According to Indian laws, there is no maximum limit upon the number of trustees but a minimum number of two trustees is mandatorily required who must be an ordinary resident of India. Secondly, various mandatory documents such as a ‘Memorandum of Association of Trust’ needs to be created which specifies the objective of the trust along with a trust deed which states the details of the trust and trustees along with properties placed under the trust.

Unlike wills, the trusts need to be mandatorily registered with the Registrar by submitting the Memorandum of Association of Trusts and Trust Deed along with requisite fee applicable to registration. Post submission, if the registrar is satisfied with the documents and procedures, a certificate of registration may be issued.

Comparative Analysis of Trusts versus Will

First of all, as compared to a will which becomes active only after the death or incapacitation of the testator, the trusts can operate during the lifetime of the owner of the property and even after their death. Secondly, for execution of a will a probate needs to be obtained which can only be obtained after the verification of assets listed in the will have been verified. However assets placed under a validly constituted trust need not be compulsorily placed under a probate, thus saving time and awarding privacy to the owner.

Additionally, wills in India can be prepared in a comparatively simpler manner without undergoing compulsory need for registration while in case of trusts, the valid conditions of trust along with manner of distribution of assets need to be provided which makes it a complex but institutionalized process. Therefore, Wills can be a competent choice for those who intend to devolve their assets in a simple and straightforward way without attaching pre –  requisite conditions for devolution of the property. However, those who own complex properties having multiple beneficiaries and intend to avoid probate can opt for creation of trusts and choose from a wide array of trusts available under the Indian law.

Last but not the least, the law also provides flexibility to create both a trust and a will for devolution of assets wherein the owner may create a trust for the majority of the property and devolve the remainder share of property among the beneficiaries in form of a will.

King Stubb & Kasiva,
Advocates & Attorneys

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