To put simply, estate planning is the legal arrangement for the transfer and distribution of one’s wealth in anticipation of death and the process by which the arrangement is completed. Estate planning involves the bequeathing arrangement through either a will or trust. Mentioned below are the modes through which estate planning may be incorporated as part of a well documented financial plan and ensure that the wealth is distributed as per the desire of the individual.

Will

The term will is defined under “Section 2(h) of The “Indian Succession Act, 1925” and means the legal declaration of the intention of the testator with respect to his property which he desires to be carried into effect after his death. A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his estate and provides for the transfer of his property at death. A will may be written on a plane piece of paper by a person of sound mind is legally admissible. Proper execution involves the step that the maker signs, dates and acknowledges the will in the presence of two legally competent adult witnesses one of whom may be a notary public and second one preferably a doctor and both are not beneficiaries of the will. A point to note here is that a “nominee” is a person who is designated to act on the behalf of the other, while a beneficiary is the person who is eligible to receive the benefits under the will. The nominee may receive the inheritance for the use of beneficiary.

Power of attorney

Power of Attorney (POA) is a legal arrangement which authorises other person to act on one’s behalf. There are two types of power of attorneys: a) Financial power of attorney: It decides who will manage the money. b) Medical power of attorney: It decides who will take health care decisions, if one is not able to take them himself/herself.

Trust

A trust is used in place of will to transfer the ownership of financial assets where direct or immediate transfer is not possible due to certain reasons and the purpose is to protect the interests of the beneficiaries. A trust is a legal relationship where property (real or personal, tangible or intangible) is held by one party for the benefit of another and it conventionally arises when property is transferred by one party to be held by another party for the benefit of a third party. It is also possible for a legal owner to create a trust of property without transferring it to anyone else, simply by declaring that the property will henceforth be held for the benefit of the beneficiary.

Gifts

Gift is also a mode thorough which the wealth can be transferred to the legal heirs or the intended person, the only difference being that the person will have to give the gift during his lifetime.. In case of a Hindu undivided family (HUF), the share of the father can be transferred to the eldest son, who shall be Karta, either by will or as per Hindu Succession Act, 1956 in case of interstate succession Class I heirs shall be entitled to the share of father if he is a co parcener.