Being the only legal heir is not enough to ensure smooth inheritance of his assets. The Bengaluru-based marketing manager lost his father to a sudden illness four years ago, but the legal battle that ensued between him and one of his paternal uncles over the ownership of a piece of land is still ongoing. By the time manager got the will, his uncle had already contested his claim to the property, since it was a shared plot.
As news of acquaintances and relatives falling gravely ill or passing away due to covid-19 trickles in, the stark reality has emerged: there is a need to be prepared for the worst for yourself as well as your loved ones.
Estate planning, which can ensure smooth inheritance, is one aspect of financial planning that is often ignored due to the taboos surrounding death. But putting it on the back-burner can mean trouble for your loved ones, like in the case of Bengaluru based marketing manager.
As per data from Press Information Bureau, in 2016, 76% of all cases pending in Indian courts were related to family and property disputes. Most of them could probably have been avoided with proper succession planning. So if you haven’t done it already, put in place a succession plan now.
Your family needs it
Estate planning is meant to streamline things out for your family and loved ones after you are no more. Making a will is the most common mode to put estate planning in motion. “In the absence of a will, the estate of the deceased person will flow under intestate succession law, which varies significantly by religion and gender. For instance, for Hindu males dying without a will, one of the major problems is that all heirs are entitled to joint and equal ownership to all assets, which includes their widow as well as all sons and daughters. This means each heir gets equal ownership in each asset, which can lead to disputes and complications if one of them wants to sell or transfer their share, as they have to seek the consent of all others. Then there are stamp duty, taxation and other factors to deal with.
In many family disputes, when a patriarch dies without a will, the children fight for ownership of the assets and cause the entire estate to get stuck in court. A will can have many utilities beyond distributing your assets. It can name a guardian for your children if you pass away before they reach adulthood; and leave specific instructions like arrangements for your funeral, organ donation, and a lot more.
No right age to do it
People often view retirement or death as a faraway probability and feel it’s not yet time to make a will. Some even feel they don’t have enough assets to make a will. But there’s no right or wrong age to do so.
Gauri Shankar Jhawar, 72, a Kolkata-based business owner, saw many of his relatives struggle with inheritance as there was no will in place. “There were disputes between kin, brothers and sisters, and the litigations depleted half the value of the property," he said. Taking a lesson, Jhawar sought professional help to draft his own will. Though he realised the importance late in life, he has advised his son, 44, to make a will as early as possible.
Writing a will
Many assume that a will has to be registered for it to be valid, but that’s not true. However, elderly clients, who are likely to have their wills challenged on grounds of mental infirmity or testamentary capacity, or clients who fear an attack on their estate from disgruntled family members, should register wills. The essential condition is that it must be in writing and the testator or the maker of the will should sign it in the presence of two witnesses (who are not beneficiaries). The witnesses must also sign the document. A will has to be in the language known and understood by the testator. If it is written in a different language, the testator needs to mention that assistance of a friend or relation was taken to read and understand the contents of the will. You will also need to appoint an executor to oversee your estate’s distribution in line with your wishes. Do take into account the succession laws applicable. For instance, if you are a Hindu, you can only bequeath an asset according to your wishes if it is self-acquired, whereas succession rules will apply for ancestral property or assets. Remember that you can alter a will as many times as you want. It is recommended that the will be revisited every three to five years due to changes in financial status, relationship status, and others. But it is a good idea to mention that it is the last will of the testator and any previous versions or codicils (amendments made to the earlier will) are invalid. It is prudent to refer to previous wills and codicils in the last or current will. But even if it is not, the last will would be considered valid unless proved to be made under suspicious circumstances. Even if the last will is unregistered, it will supersede an earlier registered will. Keep your register of assets updated and your heirs in the loop. An asset register is essentially a listing of all assets that you own directly or indirectly. The details listed are the nature of assets (bank accounts, mutual fund or stock investments, real estate, gold, among others).
Not only does having all your assets listed in one place, complete with all the details like where it is held, who the nominees are, whether it has a single holder or multiple, whether it is self-acquired or inherited, helps you get a clear picture when you’re drawing up a will, it also helps the executor in the distribution process. While the idea of one’s own mortality can be difficult to grapple with, in these uncertain times it is more important than ever to secure the interests of your loved ones.
Estate planning, which can ensure smooth inheritance, is one aspect of financial planning that is often ignored due to the taboos surrounding death. But putting it on the back-burner can mean trouble for your loved ones, like in the case of Bengaluru based marketing manager.
As per data from Press Information Bureau, in 2016, 76% of all cases pending in Indian courts were related to family and property disputes. Most of them could probably have been avoided with proper succession planning. So if you haven’t done it already, put in place a succession plan now.
Your family needs it
Estate planning is meant to streamline things out for your family and loved ones after you are no more. Making a will is the most common mode to put estate planning in motion. “In the absence of a will, the estate of the deceased person will flow under intestate succession law, which varies significantly by religion and gender. For instance, for Hindu males dying without a will, one of the major problems is that all heirs are entitled to joint and equal ownership to all assets, which includes their widow as well as all sons and daughters. This means each heir gets equal ownership in each asset, which can lead to disputes and complications if one of them wants to sell or transfer their share, as they have to seek the consent of all others. Then there are stamp duty, taxation and other factors to deal with.
In many family disputes, when a patriarch dies without a will, the children fight for ownership of the assets and cause the entire estate to get stuck in court. A will can have many utilities beyond distributing your assets. It can name a guardian for your children if you pass away before they reach adulthood; and leave specific instructions like arrangements for your funeral, organ donation, and a lot more.
No right age to do it
People often view retirement or death as a faraway probability and feel it’s not yet time to make a will. Some even feel they don’t have enough assets to make a will. But there’s no right or wrong age to do so.
Gauri Shankar Jhawar, 72, a Kolkata-based business owner, saw many of his relatives struggle with inheritance as there was no will in place. “There were disputes between kin, brothers and sisters, and the litigations depleted half the value of the property," he said. Taking a lesson, Jhawar sought professional help to draft his own will. Though he realised the importance late in life, he has advised his son, 44, to make a will as early as possible.
Writing a will
Many assume that a will has to be registered for it to be valid, but that’s not true. However, elderly clients, who are likely to have their wills challenged on grounds of mental infirmity or testamentary capacity, or clients who fear an attack on their estate from disgruntled family members, should register wills. The essential condition is that it must be in writing and the testator or the maker of the will should sign it in the presence of two witnesses (who are not beneficiaries). The witnesses must also sign the document. A will has to be in the language known and understood by the testator. If it is written in a different language, the testator needs to mention that assistance of a friend or relation was taken to read and understand the contents of the will. You will also need to appoint an executor to oversee your estate’s distribution in line with your wishes. Do take into account the succession laws applicable. For instance, if you are a Hindu, you can only bequeath an asset according to your wishes if it is self-acquired, whereas succession rules will apply for ancestral property or assets. Remember that you can alter a will as many times as you want. It is recommended that the will be revisited every three to five years due to changes in financial status, relationship status, and others. But it is a good idea to mention that it is the last will of the testator and any previous versions or codicils (amendments made to the earlier will) are invalid. It is prudent to refer to previous wills and codicils in the last or current will. But even if it is not, the last will would be considered valid unless proved to be made under suspicious circumstances. Even if the last will is unregistered, it will supersede an earlier registered will. Keep your register of assets updated and your heirs in the loop. An asset register is essentially a listing of all assets that you own directly or indirectly. The details listed are the nature of assets (bank accounts, mutual fund or stock investments, real estate, gold, among others).
Not only does having all your assets listed in one place, complete with all the details like where it is held, who the nominees are, whether it has a single holder or multiple, whether it is self-acquired or inherited, helps you get a clear picture when you’re drawing up a will, it also helps the executor in the distribution process. While the idea of one’s own mortality can be difficult to grapple with, in these uncertain times it is more important than ever to secure the interests of your loved ones.
It’s just been few days that we have bid adieu to the most sacred festival of Raksha bandhan. With every Rakhi tied by a sister to her brother, the best gift a brother can ever give his sister is financial freedom. And what could be a better day than Raksha Bandhan to start or add more to her financial independence. Here is a list of the top financial products that you can consider gifting your sister the next time you plan to gift her on this joyous festival of brother and sister. You can choose the product according to your and your sister's comfort.
Savings Account: You can open a savings account for your sister. You can deposit the money you wish to give her, it will earn her interest and she can use this money when she needs it.
Fixed Deposit (FD) or Recurring Deposit (RD): As an alternative to opening a savings account, you can make a fixed deposit in your sister’s name. It will earn her a guaranteed and better interest rate than a savings account. Or, if you want to invest a small sum every month, you can do a recurring deposit (RD) with the bank for her.
Start an SIP: Systematic Investment Plan (SIP) in a mutual fund is a great gift for your sister. You can invest a fixed sum on a regular basis for your sister for as many years as you want. You can choose to invest via SIP in an equity or a debt fund, depending on your risk appetite. You must consult your financial advisor if you have limited or no knowledge of mutual funds.
Paper gold: Instead of gold jewellery, you can buy your sister paper gold. Most of us buy physical gold and treat it as an investment. But buying gold in physical form and investing in gold are not same. Costs such as the making charges which can go upto as high as 25% of the price and GST Oon gold jewellery are irrecoverable on resale. You can instead buy her Gold ETFs. Gold ETFs are listed on the exchanges and invest in physical gold. Each unit of a Gold ETF represents 1/2 gram of 24 karat physical gold. Gold ETFs provide ample liquidity as these can be sold on exchanges anytime.
Make sure you discuss with your financial planner if you have little knowledge of any of these financial products.
Savings Account: You can open a savings account for your sister. You can deposit the money you wish to give her, it will earn her interest and she can use this money when she needs it.
Fixed Deposit (FD) or Recurring Deposit (RD): As an alternative to opening a savings account, you can make a fixed deposit in your sister’s name. It will earn her a guaranteed and better interest rate than a savings account. Or, if you want to invest a small sum every month, you can do a recurring deposit (RD) with the bank for her.
Start an SIP: Systematic Investment Plan (SIP) in a mutual fund is a great gift for your sister. You can invest a fixed sum on a regular basis for your sister for as many years as you want. You can choose to invest via SIP in an equity or a debt fund, depending on your risk appetite. You must consult your financial advisor if you have limited or no knowledge of mutual funds.
Paper gold: Instead of gold jewellery, you can buy your sister paper gold. Most of us buy physical gold and treat it as an investment. But buying gold in physical form and investing in gold are not same. Costs such as the making charges which can go upto as high as 25% of the price and GST Oon gold jewellery are irrecoverable on resale. You can instead buy her Gold ETFs. Gold ETFs are listed on the exchanges and invest in physical gold. Each unit of a Gold ETF represents 1/2 gram of 24 karat physical gold. Gold ETFs provide ample liquidity as these can be sold on exchanges anytime.
Make sure you discuss with your financial planner if you have little knowledge of any of these financial products.
The government has extended the deadline for filing income tax returns or ITRs for 2018-19 fiscal to September 30, from July 31. This is the third extension given by the government for taxpayers to file both original and revised tax returns for 2018-19 fiscal. In March, the due date was extended from March 31 to June 30. Later in June, it was again extended by a month till July 31.
"In view of the constraints due to the Covid pandemic & to further ease compliances for taxpayers, CBDT extends the due date for filing of Income Tax Returns for FY 2018-19 (AY 2019-20) from 31st July, 2020 to 30th September, 2020," the Income Tax Department said.
Here are five other income tax related deadlines to know:
1) The deadline for filing revised income tax returns for the FY 2018-19 (AY 2019-20) also gets extended to September 30.
2) The last date for employers to issue Form 16 to employees is 15 August 2020. Form 16 has the details of the total salary received by the employee, the tax deducted by the employer and deduction availed by the employee. Form 16 helps in filing ITRs. Employees who want to file their tax return or ITRs early can do so using their salary slips and Form 26AS.
3) Earlier, the government had also extended the last date of filing of the income tax return for FY 2019-20 (AY 2020-21) to 30th November 2020. It should also be noted that for linking biometric Aadhaar with PAN the deadline was extended till March 31 next year.
4) In June, the government had extended the date for making investment, construction, purchase for claiming deduction in respect of capital gains under Sections 54 to 54GB of the Income Tax Act to September 30, 2020. Section 54 relates to tax exemptions available from capital gains if the capital gains are invested in purchase or construction of residential property. Therefore, the investment, construction, purchase made up to September 30, 2020 shall be eligible for claiming deduction from capital gains.
5) Vivad Se Vishwas scheme for direct tax dispute resolution has been extended till December 31, 2020. The Vivad se Vishwas scheme was announced in Union Budget 2020 for providing dispute resolution in respect of pending income tax litigation. Under this scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty.
"In view of the constraints due to the Covid pandemic & to further ease compliances for taxpayers, CBDT extends the due date for filing of Income Tax Returns for FY 2018-19 (AY 2019-20) from 31st July, 2020 to 30th September, 2020," the Income Tax Department said.
Here are five other income tax related deadlines to know:
1) The deadline for filing revised income tax returns for the FY 2018-19 (AY 2019-20) also gets extended to September 30.
2) The last date for employers to issue Form 16 to employees is 15 August 2020. Form 16 has the details of the total salary received by the employee, the tax deducted by the employer and deduction availed by the employee. Form 16 helps in filing ITRs. Employees who want to file their tax return or ITRs early can do so using their salary slips and Form 26AS.
3) Earlier, the government had also extended the last date of filing of the income tax return for FY 2019-20 (AY 2020-21) to 30th November 2020. It should also be noted that for linking biometric Aadhaar with PAN the deadline was extended till March 31 next year.
4) In June, the government had extended the date for making investment, construction, purchase for claiming deduction in respect of capital gains under Sections 54 to 54GB of the Income Tax Act to September 30, 2020. Section 54 relates to tax exemptions available from capital gains if the capital gains are invested in purchase or construction of residential property. Therefore, the investment, construction, purchase made up to September 30, 2020 shall be eligible for claiming deduction from capital gains.
5) Vivad Se Vishwas scheme for direct tax dispute resolution has been extended till December 31, 2020. The Vivad se Vishwas scheme was announced in Union Budget 2020 for providing dispute resolution in respect of pending income tax litigation. Under this scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty.
As many cities continue to be under lockdown, I wonder whether the new normal of the future will resemble anything of the past. Will we ever go to a movie theatre, breathing in the same air as 200 other people? Or watch a live IPL match with 50,000 strangers? Will we continue to hold our breath when a neighbour steps into the elevator, or leave home without masks? Just as we are getting our heads around a new normal when it comes to our lifestyle, we also need to think about a new normal when it comes to our money.
We make decisions with respect to our financial plans based on the available information at a point of time. However, life is not a straight line. It is volatile like many of the investments we make. The volatility can come from the market environment, instrument performance, regulations and your personal situation.
We may need to revisit plans we made in the middle of a sustained bull or bear market when the cycle changes. A strong scheme may go through a protracted down phase. The tax treatment of an instrument may make it more desirable or less suitable in the current circumstance. An inheritance or an unexpected surge of medical bills may change our financial situation dramatically.
While it is important to remain calm during volatility and stick to our long-term goals, even those long-term goals need short-term, tactical course corrections to ensure that they remain viable. Hence, changes or disruptions make the review process in financial planning very important. Periodic reviews that analyse the current set of circumstances and their bearing on our future goals help us to make the necessary tweaks and ensure the plan stays aligned with those goals.
When a major disruption such as covid-19 occurs, doing nothing is not an option. As intelligent beings, it is only natural that we would want to jump right in and fix what is broken. There are plenty of questions running through our minds. Are our retirement plans still on track, or should we rework those retirement projections in the face of the current uncertainty? Should we defer our early retirement goals by a few years given the dip in the portfolio corpus? But if early retirement is a non-negotiable goal, should we tighten our expenses and continue to accumulate assets towards the retirement corpus? If we are already well into retirement, do we need to re-look our withdrawal rates?
For many of us, our cash flows have been affected because of pay cuts or job losses. While several of the discretionary outflows such as vacations, entertainment or hobbies may not be viable for some time, we may still need to trim expenses to realign to a reduced salary. For those of us who have ongoing systematic investment plans (SIPs) into long-term investments, it may be worthwhile stopping those and building up short-term liquidity instead.
If we are approaching important milestones that require large money outflows, such as buying a property or funding undergraduate or postgraduate education abroad, we may need to defer those decisions by a few years or partially fund those goals, if funding them entirely impacts our future financial independence. And frankly, the idea of buying a house in a bustling city amid a large population is beginning to look far less alluring by the day.
Investment deductions and salary exemptions that provided huge tax benefits in the old tax structure provides no such benefit in the new structure. The tax benefit you enjoyed on the interest component of your home loan may well turn out to be just an expense now. Hence, if you choose the new structure, you may consider closing or reducing your home loan, so you do not have a committed outflow each month. Market volatility also presents mouth-watering opportunities for investment. If you are committed to maintaining your required asset allocation, periodic portfolio rebalancing will instil the discipline of buying low and selling high. You will also do better than most of the investing population whose decisions are primarily driven by emotions rather than financial prudence.
Above all, we must ensure our life and health are adequately covered. Do not let existing life and health covers lapse. Reinstating those policies may require fresh medical tests and expose us to the risk that the policy may not be issued because of an underlying health condition.
Only a cure for or a vaccination to prevent covid-19 will bring the hope of normalcy. Until then, we should invest in our physical and financial health. Stay tuned to the big picture, while making small course adjustments along the financial journey. Whether it is increasing our contingency budget, reducing or postponing expenses, increasing or decreasing SIPs, or reducing or closing out loans, we must take constructive actions on our financial plan. This way we will control, rather than let events control, our financial destiny.
Source: Live Mint, Economic Times
We make decisions with respect to our financial plans based on the available information at a point of time. However, life is not a straight line. It is volatile like many of the investments we make. The volatility can come from the market environment, instrument performance, regulations and your personal situation.
We may need to revisit plans we made in the middle of a sustained bull or bear market when the cycle changes. A strong scheme may go through a protracted down phase. The tax treatment of an instrument may make it more desirable or less suitable in the current circumstance. An inheritance or an unexpected surge of medical bills may change our financial situation dramatically.
While it is important to remain calm during volatility and stick to our long-term goals, even those long-term goals need short-term, tactical course corrections to ensure that they remain viable. Hence, changes or disruptions make the review process in financial planning very important. Periodic reviews that analyse the current set of circumstances and their bearing on our future goals help us to make the necessary tweaks and ensure the plan stays aligned with those goals.
When a major disruption such as covid-19 occurs, doing nothing is not an option. As intelligent beings, it is only natural that we would want to jump right in and fix what is broken. There are plenty of questions running through our minds. Are our retirement plans still on track, or should we rework those retirement projections in the face of the current uncertainty? Should we defer our early retirement goals by a few years given the dip in the portfolio corpus? But if early retirement is a non-negotiable goal, should we tighten our expenses and continue to accumulate assets towards the retirement corpus? If we are already well into retirement, do we need to re-look our withdrawal rates?
For many of us, our cash flows have been affected because of pay cuts or job losses. While several of the discretionary outflows such as vacations, entertainment or hobbies may not be viable for some time, we may still need to trim expenses to realign to a reduced salary. For those of us who have ongoing systematic investment plans (SIPs) into long-term investments, it may be worthwhile stopping those and building up short-term liquidity instead.
If we are approaching important milestones that require large money outflows, such as buying a property or funding undergraduate or postgraduate education abroad, we may need to defer those decisions by a few years or partially fund those goals, if funding them entirely impacts our future financial independence. And frankly, the idea of buying a house in a bustling city amid a large population is beginning to look far less alluring by the day.
Investment deductions and salary exemptions that provided huge tax benefits in the old tax structure provides no such benefit in the new structure. The tax benefit you enjoyed on the interest component of your home loan may well turn out to be just an expense now. Hence, if you choose the new structure, you may consider closing or reducing your home loan, so you do not have a committed outflow each month. Market volatility also presents mouth-watering opportunities for investment. If you are committed to maintaining your required asset allocation, periodic portfolio rebalancing will instil the discipline of buying low and selling high. You will also do better than most of the investing population whose decisions are primarily driven by emotions rather than financial prudence.
Above all, we must ensure our life and health are adequately covered. Do not let existing life and health covers lapse. Reinstating those policies may require fresh medical tests and expose us to the risk that the policy may not be issued because of an underlying health condition.
Only a cure for or a vaccination to prevent covid-19 will bring the hope of normalcy. Until then, we should invest in our physical and financial health. Stay tuned to the big picture, while making small course adjustments along the financial journey. Whether it is increasing our contingency budget, reducing or postponing expenses, increasing or decreasing SIPs, or reducing or closing out loans, we must take constructive actions on our financial plan. This way we will control, rather than let events control, our financial destiny.
Source: Live Mint, Economic Times