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Clients must create will at an early stage

“When should one make his or her will?” A lawyer asked question to the packed auditorium. Pat came the replies: ‘why do I need a will?’, ‘as soon as possible’, ‘after retirement’, ‘after one’s marriage’. To this, lawyer replied, “One must make will at least one day before he or she is about to die.” And the crowd burst out laughing and had also understood the point eminent speaker was making.

Wealth Managers and Independent Advisors have come a long way over last 2 decades of Financial Advisory. From the time of advising in which of the fixed deposit schemes one should invest in, today clients have benefitted immensely by having invested their savings in more sophisticated instruments based on expert advice. As AMFI data shows number of investors and AUM is consistently rising. Moreover, clients have also become more receptive to Equity as an investment class and SIPs as way of investing. The Indian industry has also seen maturity in insurance advisory and emergence of private equity funds.  Although Wealth management involves more than advising clients on MFs, majority of IFAs and even private banking RMs have done well by including these investment instruments in client’s portfolio. However, it may be right time to focus on offering a complete bouquet of services to Wealth Management clients.

Over the years Wealth Creation and Wealth Preservation has been well propagated. Preservation as the word denotes is to protect what has already been created. In this stage though the client is not looking at excessive returns with high volatility, he is still expecting to generate better than inflation returns and keep his wealth intact with time. Preservation involves more of discussing and making small changes to portfolio that already exists and taking care of changing needs of clients without taking excessive risk. The third step that completes the Wealth management is Wealth Transmission. Without having this step covered Wealth Management remains incomplete. Advisors must engage with clients early enough on Wealth Transmission. Advisors stand to generate good amount of goodwill by bringing this step up-front with their clients. It will also make him stand out from the regular product pushers who only visit clients to sell as against provide advice. This will also be a true test of Advisor because normally a client invests only part of his surplus through one distributor whereas while making a will he will have to disclose his complete wealth and there lies the trust in the Advisor.

Why is Wealth Transmission so important? Are we ready to discuss this step openly with our clients? Does it require in-depth understanding of law? And is that why advisors do not bring this up with clients? These are some questions that we must find answers to.

Wealth Transmission is important because it takes years or even decades to create and preserve wealth but the same wealth can get seriously impaired if the creator doesn't carefully plan Transmission in a clear manner. It is imperative that advisors pay even more attention to this third step. Dissolution is certain in life but what is uncertain is its time. And because this time is uncertain one needs to get prepared.

Simplistically, Wealth can be transmitted by a simple will. A will is an important document that enables an individual to rightfully distribute his assets and wealth to whomsoever he wants to after his death. In this way, a person can ensure that his wishes are carried out with regards to distribution of his assets. All assets need to be mentioned that are owned by creator. Not only it is the right way to transmit, it is the most economical way as well. In case a will is not made, post death the transfer of assets may involve a long winded process of collecting the details about all assets, clearing off the liabilities and then seeking the transfer of assets. This process quite often requires one to organise NOCs (No objection Certificates) from all legal heirs to deciding who inherits what portion of wealth. This may lead, at the least, to delays in claiming assets and lack of liquidity during such period or, at the worst, to long drawn out disputes over distribution of assets. In case will is not made, post dissolution the transfer of assets is subject to state court fees and inheritance laws. For example, to get a succession certificate in Mumbai, clients have to pay court fees of fixed amount of Rs. 3 lacs or 0.75% of Assets whichever is lower where as in New Delhi court fees can be as high as 2.5% of Assets. This fee needs to be deposited in court as liquid money which in itself can be big sum depending upon the total assets that heirs are looking at transferring. Legal fees and other costs associated with court proceedings are additional.

Post amendment in 2005 to the Hindu Succession Act 1956, married daughters are also equally entitled to parent’s assets. Take an example where there are 2 married daughters and an unmarried Son. If the testator (creator of will) dies intestate (without writing a will) his property would get equally divided between 3 children. Now consider a situation where, as is the custom, daughters may have been given substantial assets as gifts and the parents may have desired to pass on the family home to the Son. Not leaving a will with their desires can create unnecessary complexity if daughters desire differently. This may lead to complication in relations and can convert best of relations into sour ones.

A Probate (Certificate under the seal of the court and signed by one of the registrars, certifying that the will has been proved) is required in Jurisdiction of Mumbai, Chennai and Kolkata high court. Under other court jurisdictions Probate is not compulsory and wishes of testator directly can be exercised as per will by the executor.

It does require good understanding of Inheritance laws but at the same time there are services available that Advisors can take. It takes an experienced estate planning lawyer to evaluate client’s particular situation and advise you of the options that best suit client’s estate planning needs and goals. At SATCO Wealth we have this service available for our clients.

Important Steps to be followed for making a will:

Step 1: Drafting a will.

While preparing a will it is essential to take extra precaution. One wrong word or missing signature can change the entire intent of a will. Getting a will drafted with the help of lawyer can help you avoid costly mistakes.

Step 2: Attestation of a will

Once the will is drafted, the testator needs to sign or affix his mark to the will. The signature or mark of the testator should appear clearly and should be legible. It should appear in a manner that is appropriate and makes the will legal. A will should be attested by two or more witnesses, each of whom has seen the testator signing or affixing his mark on the will. Each of the witnesses should sign the will in the presence of a testator. A witness need not read the contents of the will before signing it.

Step 3: Registration

(Under section 18 of The Registration Act, 1908, the registration of a will is optional). However, registering a will gives you strong legal evidence that the proper parties had appeared before registering officers and the latter had attested the same after ascertaining their identity.

  • A will must be proved as duly and validly executed as required by the Indian Succession Act.
  • Once a will is registered, it is placed in the safe custody of Registrar and therefore cannot be tampered with, destroyed, mutilated or stolen.
  • It shall be released only to the testator himself or, after his death, to an authorized person who produces the Death Certificate.
  • The cover should be super scribed with the name of the testator or his agent with a statement of the nature of the document.

Procedure for registering a will:

A will is to be registered with the registrar / sub – registrar with a nominal registration fee. The testator must be personally present at the registrar’s office along with witnesses.

A will does not require stamping.

All of above only applies to wills and codicils made by Hindus, Buddhists, Sikhs or Jains.

-Author of above article is Mr. Deepak Jaggi, co-founder and Director at SATCO Wealth Managers Pvt. Ltd. Mr. Jaggi has over two decades of experience in distribution of financial services like Mutual Funds, PMS, AIF, Life Insurance and other products. He has worked in organizations like Deutsche Bank AMC, HDFC Standard Life, Zurich AMC and Kotak Securities.