ESTATE PLANNING IN INCOME TAX
Today we will understand the important topics what is ESTATE PLANNING IN INCOME TAX. Meaning of estate planning, why it is needed also how to do estate planning.
Meaning of Estate Planning
Estate planning means plans for the transfer of your estate after death. Estate includes all movable and immovable property you own like cash, clothes, jewelry, cars, houses, land, bank accounts.
Why Estate planning?
- Pass on your wealth
- Caring for your family
- No Court battles
- Digital settlement
Estate planning by way of
- Joint holder
- Nomination
- WILL
- Private trust
- Gift
Estate planning by way of Joint holder
Make the joint holder in all assets like bank FD, Demat account , MF, PPF accounts. In the case of a joint-holder only a death certificate is sufficient to transfer the property.
Estate planning by way of Nomination
Nomination is helpful till the WILL get executed, Note in case of share and DEMAT account nomination is Prevail our WILL.
Estate planning by way of WILL
WILL to be given the priority over the nominee in all cases other than share and demat account
Note – It is advisable to keep the same person in a nomination as well as in WILL.
How to make a Will?
- For making a WILLS No stamp paper required. WILL can be made in a plain paper
- 2 witness required
- Appoint executors
- Make WILL in details mention the complete name and property details with address
- Designate beneficiary – Any person can be beneficiary. If you are not making your family member as a beneficiary than also specify.
- Mention date is the WILL – It is very important as WILL that is made in a later date to prevail our WILLS made on an earlier date.
- For Foreign property kindly make the separate WILL. It is advisable to make the separate WILLS for each country.
- Registration of WILL is not compulsory.
Foreign properties
- If assets in UAE – Kindly make the DIFC Registered WILL/ADGM WILL
- If assets in UK – kindly considered Inheritance tax
- If assets in US – kindly pay US federal and state estate duty
Estate planning by way of PRIVATE TRUST
The private trust will reduce the succession dispute like WILLS. In a private trust, there is complete control during the lifetime and after death.
How to make a Private trust
- A private trust is a separate entity having PAN and TAN in his own name.
- Helpful in avoiding estate duty when it comes
- Reduce succession disputes that happen in WILLS
- No probate required like in WILLS
- Complete control during lifetime and after death also
- Very useful if the beneficiary is a minor, unborn person, married daughter, Handicapped, Relative, Mentally unstable, Pets etc
- Registration of private trust is not compulsory
Can Private Trust own asset in his name?
Private trust can own immovable property, land building, etc.
Can open a bank account in its own name
- Can held a unit of mutual fund
- Private trust cannot open a DEMAT account in his name. but we can make DEMAT account in the name of trustee and linked the bank account of the trust.
- Once asset parked in a private trust
- No Gift
- No Nomination
- No WILLS
- No Interstate succession
How to make a GIFT DEED
Transfer of movable or immovable property from Donor to Donee without consideration. Gift once made cannot be revoked. Only conditional gift can be revoked if the condition not fulfilled.
Note: It is always advisable to make the gift deed conditional example – while making the gift deed make the point that retention of property in the hands of donor till his lifetime.
ESTATE PLANNING IN HUF
A Hindu Undivided Family (HUF) is automatically created at the time of marriage as a separate taxable entity and a new PAN Card is allotted to the HUF. Hindus, Buddhists, Jains and Sikhs can form HUFs. The head of a HUF is called the Karta, he is the senior-most male member of the family.
Daughter can be karta in father HUF. Elder member of the HUF will be the karta.
How to do the Partion of HUF?
Manner of partition
- Oral
- Suit
- Agreement
- Arbitrator
It is very important as HUF law provides partial partition while the Income-tax act will recognize only complete partition. example if HUF owns five property and partition of 4 property done while one is in the name of HUF than in income tax act all the five will be taxable in the hands of HUF.
Challenges in HUF
Multiple owners of a single property are major concern Also, If any co-parcener is a US citizen or green card holder than how to shown tax is also an issue.
