Estate planning


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Estate planning

  3. 3. Objective of Estate Planning Explain the use of a will… Describe estate taxes… Explain the use of trusts, gifts, and contributions… Introduce other aspects of estate planning…
  4. 4. ESTATE PLANNINGThe act of planning for how your wealth will be allocated on or before your death is Estate Planning.
  5. 5. ESTATE An Estate represents a deceased person’s assets after all debts are paid.At the time of a person’s death, the estate isdistributed according to that person’s wishes.
  6. 6. WILLA legal request for how your estate should be distributed upon your death. It can also identify a preferred guardian for any surviving children. In will, you can specify the beneficiary.
  7. 7. WILLTo create a valid will, minimum age is 18 or 21 One must also be mentally competent and should not be subject to undue influence or threats from other.
  8. 8. BENEFICIARY Beneficiaries are also regarded as Heirs.The person specified in a will to receive a part in a estate of a person is beneficiary.
  9. 9. • SimpleTYPES OF • Traditional Marital WILLS Share Will
  10. 10. TYPES OF WILLSSimple Will: A will that specifies the entireestate be distributed to a person’s spouse.Traditional Marital Share Will: A willsuitable for larger estate that distributes half ofthe estate to the spouse and other half to anychildren or trust.
  11. 11. KEY COMPONENTS OF A WILL Executor Guardian Signature Letter of last instruction
  12. 12. KEY COMPONENTS OF A WILL Executor/personal representative – The person designated to execute the instructions of the will regarding distribution of assets. Guardian – Person assigned for caring of children and managing any estate left to the children.
  13. 13. KEY COMPONENTS OF A WILL Signature – Its needed to validate the will and ensure that its not a fake will. Letter of last instruction – A supplement to a will that can describe your preferences regarding funeral arrangements and indicate where you have stored any key financial documents.
  14. 14. SAMPLE WILL1. Introduction of family2. Payment of debt and taxes3. Distribution of the Estate4. Trust for Children5. Executor6. Guardian7. Power of Executor8. Power of Trustee
  15. 15. FOCUS ON ETHICSIf the court determines that there is a fraudor unethical behavior or some form of undue influence on the creator of the will, it may prevent the person who used fraudulent or unethical behavior from receiving any benefits.
  16. 16. CHANGING YOUR WILLThe will may be changed if the person : Move to a different state. Get married or divorced after creating the will. The person wants to change it because of any reason
  17. 17. CHANGING YOUR WILL The new will must specify that previous will was revoked to avoid multiple wills with conflicting instructions. For minor changes, a CODICIL can be added. This document specifying changes in the will. These are only minor revisions.
  18. 18. EXECUTING A WILL DURING PROBATE To adhere to the instructions of the will, probates are formed. Probate is a legal process that declares a will valid and ensures the orderly distribution of assets.
  19. 19. PROBATE PROCESS To start the probate process, the executor files forms in a local probate court, provides copy of the will, provides a list of the assets and debts of the deceased person, pays debts and sells any assets that need to be liquidated. Alternatively an attorney can be hired to complete the process.
  20. 20. TRUSTSTrust is a legal document in which one person transfers assets to another who manages them for designated beneficiaries.
  21. 21. The two parties are: GrantorParties Trustee
  22. 22. TYPES OF TRUSTS Testament ary LivingStandard Family Revocable Irrevocable Living Living
  23. 23. LIVING TRUSTS Assigning the management of your assets to a trustee while you are living. Managing the assets includes making decisions on how to invest or spend cash in terms of need.
  24. 24. REVOCABLE LIVING TRUST Dissolve or revoke the trust at any time you being the legal owner. The two reasons: To replace the trustee. To manage the trust yourself. By using a revocable living trust probate process is avoided but not the estate taxes.
  25. 25. IRREVOCABLE TRUST Living trust that cant be changed. Can provide income to the grantor but the assets in the trust are no longer legally yours. Not subject to estate taxes upon your death as assets are not the part of your estate.
  26. 26. STANDARD FAMILY TRUST Also called Credit-Shelter trust. Established for children in a family. It is a type of testamentary trust.
  27. 27. TESTAMENTARY TRUST Trust created by wills. Not structured as a living trust but it can be used to avoid estate taxes just as the irrevocable trust.
  28. 28. GIFTS GIFTS is a tax free distribution of funds from one person to another. Individuals receiving shares or jewelry, valuable artifacts, valuable drawings, paintings or sculptures or even property valued over Rs 50000 as gifts from non relatives have to pay taxes.
  29. 29. CONTRIBUTIONS CONTRIBUTION TO CHARITABLEORGANISATIONS: Any money donated from an estate to acharitable org is not subject to estate taxes.Many individuals plan to leave donations forcharitable orgs regardless of the taximplications.
  30. 30. OTHER ASPECTS OF ESTATE PLANNING Living will – a legal document in which individuals specify their preferences if they become mentally or physically disabled. EXAMPLE:-Not keeping an individual on a life support when he falls ill to ensure that his assets are used in the way that he or she prefers.
  31. 31. OTHER ASPECTS OF ESTATE PLANNING Power of attorney – a legal document granting a person the power to make specific decisions for you in the event you are incapable. EXAMPLE:- Naming a family member or a close friend to make investment and housing decisions if one falls ill.
  32. 32. OTHER ASPECTS OF ESTATE PLANNING Durable POA for health care – a legal document granting a person the power to make specific health care decisions for you. It works in the circumstances when the situations is not covered by your living will. Necessary decisions will be made by someone who knows your preferences
  33. 33. MAINTAINING ESTATE PLAN DOCUMENTS Estate planning information such as will, living will and power of attorney. Life insurance and other insurance policies. Retirement account information. Home ownership and mortgage information. Ownership of other real estate. Personal property such as cars and jewelry.
  34. 34. MAINTAINING ESTATE PLAN DOCUMENTS Mortgage information Credit card debt information Ownership of businesses Personal legal documents Personal tax filing Bank account information Investment information
  35. 35. RISKS AND DRAWBACKS An individuals goals or wishes on how his assets are to be distributed may not be fulfilled. Huge costs of transfer and taxes. Time consuming legal procedures.
  36. 36. RISKS AND DRAWBACKS An individuals family may be in financial distress if the process is not properly planned. There may be insufficient liquidity to meet clients debts and taxes.
  37. 37. INHERITENCE LAWSAccording to FEMA Regulation 2000, a non- resident who is a citizen of India can only transfer properties to: 1. A resident of India 2. A citizen but not a resident 3. A non-resident of Indian origin
  38. 38. What Inheritance Laws apply in India? No uniform codified laws apply. Different religious groups subscribe to different laws. Hindus have their own codified law (Hindu Succession Act) as well as a part uncodified. Muslims have their own Islamic Law on Succession. Parsees, Christians come under Indian Succession Act.
  39. 39. Taxation No inheritance or gift tax is levied in India.Recipient of assets is subject to wealth tax. Net wealth tax is levied at 1% on ataxpayer’s net assets if it exceeds INR3million (US$60,599).Income tax authorities are responsible forassessing property value.
  40. 40. Financial Planning toolsRetirement Liquidity planning Management Estate Planning Decisions Investing Financing Protecting your assets and income
  41. 41. A man may keep a woman, but nothis estate. Samuel Richardson