Estate planning is not just writing of Will and getting it probated. We also need to know what is estate planning and why it is important and what options are available.

We plan for our household & medical expenses, buying a house, plan for retirement, children’s education and their marriage among others. One area which gets the least focus is estate planning. Most of the people are either not aware about or are conscious of estate planning. Most of the business class plans about building business and creating assets while service class does not feel that the need since they think the ‘estate planning’ is for wealthy people.

Most people believe that the only option available for estate planning to them is ‘writing of Will’ and this requires assistance of a lawyer. But even a certified financial planner can provide us value based service in case of estate planning.

With our growing income, the lower middle class is now becoming upper middle class, and upper middle class is becoming upper class. This decade will see rise in population of millionaires & billionaires. People today realise the need to preserve the wealth built and pass it down judiciously. Thus, the need for estate planning is increasing. Living discretionary trust is perceived to be realm of a few rich but this is a very simple process and is not a rocket science.

What is estate planning?

We Indians have one of the highest per capita saving rate. On an average Indian saves 28% of GDP (gross domestic product). The reasons for saving include lack of social support for senior citizen from government (in short planning for our own retirement), habits (we have seen our parents saving extra pie for rainy days) and goal based saving (like for buying house, car, etc) among others.

We would like to pass down our hard earned saving in a judicious manner to next generation. Whatever we accumulate during our life (earning minus expense + growth) forms our estate that we pass on to our next generations. Estate includes immovable like home (real estate), agricultural land, etc, as well as immovable assets like gold jewellery (commodity), our bank balance & fixed deposits (cash). Items such as our collections like coins and paintings are also a part of the estate.

Why plan

While we are young, we do not feel the need to plan. We procrastinate estate planning till the time our retirement. Little do we realise the uncertainties of life. Many equate planning to die. Hardly do they realise the problem faced by inheritors.

Only a few people realise the uncertainty of life. Over Rs. 38.37 billion was lying unclaimed with provident fund department as on March 2009. Similarly thousands of crore rupees are lying unclaimed in bank accounts. According to RBI (Reserve Bank of India), Rs. 10.18 billion was lying in 13 million accounts as on December 2009. This figure is expected to have increased since claim on such deposit takes long time. Most of this money is lying in saving accounts. Bank deposits are mostly handled by husband while their wives are unaware of these deposits.

Objective of estate planning is that you decide who will receive and control your assets. If you desire that every penny of your hard money should go to your next generation, you should be doing estate planning.

When to plan

Most of us defer estate planning for later date or time. Not that we do not want to plan distribution of our assets, but we avoid for various reasons such as—to avoid discussion on demise, avoid difference of opinion with better half on distribution of asset, lack of knowledge, etc.

Now is the best time to plan. The same needs to be updated once a year. You can plan for assets acquired and also for assets that you may acquire in future. We must put this on our priority list and not postpone it, thinking it to be irrelevant.

How to do estate planning

There are various ways one can do estate planning. Please refer to Tools of Estate Planning for more details.

Tax and Estate Planning are integral parts of the financial planning process which carves a security cover around the wealth and assets already created for entitling them to dependents without any legal hassles with optimum tax efficiency. Though the process is challenging both emotionally and technically, taking the services of a certified financial planner, or CFP, is preferable who can guide one through the process getting the right inputs as and when required