Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

EXECUTING YOUR WILL IS SIMPLE!

Useful tax planning can also be achieved for the family through smart distribution of properties under a Will!

Last Monday, we discussed regarding the importance of executing a Will. The drafting and execution of a Will is indeed very simple and you can even do it yourself without any sophisticated legal advice, if you just bear in mind the following key points:

  • A Will can be executed on simple paper and it is not necessary to have any stamp paper or legal paper for the same.

  • No legal jargon is required to prepare a Will. In fact it is desirable that the clear intention of the testator can be understood in clear and simple language.

  • The most important thing in connection with the execution of a Will is attestation of the Will by two witnesses who are present at the time of signature of the testator and who sign as witnesses to the Will. It would be advisable if a person who is beneficiary under the Will does not sign as a witness.

  • The testator should preferably sign each page of the Will and if there are any corrections in the same he should initial them in the margin. If there are too many corrections, it would be better to prepare a new Will.

  • A Will is not required to be compulsorily registered. However, where it is apprehended that the genuineness of the Will is likely to be challenged, it may be advisable to consider either notarization of the Will before a Notary Public or registration of the same before the Registrar. In such circumstances, it may also be advisable to have the individual’s family Doctor sign the Will certifying that he or she is of sound physical and mental health.

  • Since the implementation of the Will is to be effective upon the death of the individual, it would be necessary to appoint one or more executors under the Will. The testator should try to appoint trusted persons as executors and clearly mention their names under the Will authorizing them to act as executors. There is no legal bar against appointing a beneficiary under a Will as an executor of the same. It is not necessary to have the executors sign the Will.

  • As mentioned hereinabove, if some points are required to be settled or corrected in the original Will, a supplementary document of ‘Codicil’ can be prepared.

  • The same points as mentioned above in respect of a Will should be kept in mind   while preparing the Codicil. It would be necessary to have the Codicil attached along with the Will and keep the original document at a safe place and give necessary information in regard to the same to close family members or friends. It may also be advisable to give a copy of the Will or Codicil to the executors for their reference.  

DISTRIBUTING PROPERTIES UNDER A WILL

Through execution of a Will, a person can ensure that useful tax planning benefits are availed of by his legal heirs after his death. It is common to see a testator wishing to distribute his properties amongst close members of his family.

For example, when a father executes a Will, he may want to distribute his properties amongst his sons. At such a time, the father should also keep in mind the taxable income and wealth of his sons. If the sons have taxable income or wealth attracting tax at a high bracket, distribution of assets to them would further increase their income-tax and wealth-tax liabilities.

In such a case, if the father distributes such properties under the Will to the sons’ wives, sons’ children or sons’ HUFs, whose taxable income and wealth are either below taxable or in a comparatively low tax bracket, this would be extremely useful from the point of view of tax planning.

Accordingly, any person who is expecting to receive some properties as a beneficiary from the estate of his parents or close relatives should try to ensure that such properties are received by the family members in a low tax bracket.

However, what can be done, in case the members of the family are in the top tax brackets of 30.9% or 33.99%? In such circumstances, the testator can avail the benefits of useful tax planning by creation of a Discretionary Trust under his Will.

 

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