Succession Planning in India: Wills, Nominations and Private Family Trusts

Succession planning isn't only for the wealthy. Any family with property, investments or a business benefits from deciding in advance how assets will pass on. This guide explains the main tools.

What Happens Without a Will

Without a will, assets pass under the personal law that applies — the Hindu Succession Act for Hindus, Sikhs, Jains and Buddhists; Muslim personal law; or the Indian Succession Act for Christians, Parsis and others. The result may not match your wishes, and heirs may need succession certificates or court orders to access assets.

Wills

• A will must be in writing, signed by the testator, and attested by two witnesses.
• Registration is optional, but makes it harder to challenge.
• It can be changed or revoked at any time.
• Appoint an executor you trust.
• Muslims can generally bequeath only up to one-third of their estate by will without heirs' consent.

Nominations Aren't Enough

Nominees on bank accounts, shares and insurance receive the assets, but the Supreme Court has held that nominees under the company and depository laws generally hold them for the legal heirs. A will decides the ultimate ownership. Keep nominations and the will consistent.

Private Family Trusts

A private trust holds assets for beneficiaries under a trust deed, managed by trustees. It can:

• Keep a family business under unified control.
• Protect minors or dependants.
• Avoid probate and reduce disputes.
• Provide for beneficiaries over generations.

Trust taxation depends on the type: income of a revocable trust is taxed in the settlor's hands; discretionary trusts can be taxed at the maximum marginal rate.

Probate

Probate has been mandatory for certain wills relating to Mumbai, Chennai and Kolkata. Changes to this requirement have been proposed; check the current position before relying on it.

Getting Help

Think Filing plans succession with families, working with lawyers on wills and trust deeds.