Estate planning is a broad category that includes wills, healthcare powers of attorney, living trusts, financial powers of attorney, nominations etc. Estate disputes are not uncommon. Most of the time the conflict arises from disgruntled family members who may have been given less than what they deemed their fair share or even left out of altogether. Other times, long-lost relatives reappear and make an attempt to lay claim to a portion of the fortune. Many famous personalities such as Michael Jackson, Nelson Mandela and even the Business Tycoon Dhirubhai Ambani have had their families involved in battles.
So why one doesn’t plan their estates?
Estate planning has a negative sentiment involved .i.e the death of the concerned person. It is an uncomfortable topic to discuss. There is also a preconceived notion that estate planning is something that one does towards the end of life, while on the flip side it is an ongoing process.
As a result, many times, people die intestate (dying before making a will) which only causes bickering and plethora of legal documentation. According to NASDAQ estimates, about 70% of wealth is lost when transferred from the wealth creating generation to the next and about 90% is lost by the time it reaches the third generation.
What happens when one dies intestate ?
When a person dies intestate, inheritance happens via succession laws. Succession Laws in India are based on religion which are complex in nature. Apart from the social cost involved in intestacy, the financial cost are also significant. In absence of a will, the successors have to obtain a succession certificate from court which costs around Rs 75,000 to Rs 80,000 and about 6-8 months of waiting period.
Trusts Vs Will
Wills and Private Trusts are the two tools used globally for estate planning. Will, as we all know, is an age old method and the most commonly used tool to bequeath assets. Trust, on the other hand is a more advanced and structured tool usually preferred by wealthy families. A combination of both works best for most families.
Most wealthy families form trusts to ring fence their assets, i.e. making them free from court attachment in an event of insolvency.
Nomination Vs Will
Nomination only provides trusteeship rights to the nominee. If the nomination is challenged, succession laws override the same. Whereas a will can always override nomination. Hence mere nomination is not enough. A will is the final word!
An interesting case study
Millionaire socialite Valmai Roche had left her three daughters 1.50 dollars each from her $3.5-million estate because she believed they conspired over the death of her mother. She left the same amount to her ex-husband, John Roche.
Roche, who died at the age of 81, left ’30 pieces of silver of the lowest denomination of currency’ – or 30 five cent pieces – claiming it was ‘blood money due to Judas’ to each of her daughters and also ‘specifically excluded’ her daughters along with her husband from any further benefits from her estate.
In 2012, the Roche’s daughters gained control over the $3.5 million by claiming that Mrs. Roche had an unstable mind.
Well, if one does not want to leave anything for their heirs, better spend it during their lifetime!
By Rashi Chheda
The Endeavour Editorial Club 