PASSING YOUR WEALTH TO YOUR GRANDCHILDREN

Most people wish to leave a legacy behind after they are gone, for their grandchildren. Many buy assets or make investments while mentally allotting these to a grandchild. But this may not be enough. A proper succession plan is needed if you want your assets to go to specific people, such as your grandchildren.   This is because without clear instructions mentioned, say, in a Will, succession laws will apply which may or may not be in accordance with your wishes.Therefore, if you want to bequeath something to your grandchild, a proper succession plan is needed.

Through Will or Trust

The two most popular ways to bequeath immovable assets, to grandchildren are via a Will or a Trust. A Will is a legal declaration of a person’s intentions, which a person wishes to be, performed after his/her death. It regulates the process of passing on assets and provides for succession as declared by the testator.

Grandparents like to keep some portion of movable and/or immovable assets for their grandchildren. It is important to highlight the same in a Will created by them.

In India,succession laws are determined by the faith that the testatorfollows. So, this factor plays a big role in the way assets aredivided or a Will is prepared and executed.

In the caseof Hindus, Christians, Parsis, Jains, Sikhs, and Jews, the Will wouldhave to be executed and attested in the manner set out in theSuccession Law.

ForMohammedans, the general rule (with certain exceptions) is that aMohammedan cannot bequeath more than one-third assets by way of aWill.  Therefore, even if the bequest is to a grandchild orgrandchildren, the case of Mohammedans, be more than one-third of theassets of the testator/testatrix, and in some cases.

A good wayto start preparing a Will is by listing out all your assets andclearly putting down the names and percentage of assets to beallotted to each grandchild so that any conflict at a later stage canbe avoided. It is advisable to seek professional help for draftingyour Will.

Ensure thatyour Will is executed in the manner prescribed as per law. “Ifcertain heirs are being excluded and a preference is being given tograndchild, then it is possible that the excluded heirs may challengethe validity of the Will. So the testator or testatrix needs toensure that adequate precautions are taken so that the challenges canbe properly dealt with at the relevant time and the bequest is upheldas legal and valid.

A Trust is advance succession planning mechanism from a Will. It is a fiduciaryarrangement that allows a third party (known as a trustee) to holdassets on behalf of beneficiaries. Trusts can be arranged in manyways and can specify exactly how and when the assets are passed tothe beneficiaries.

A privateTrust may be useful in scenarios where there is a significant wealthinvolved and the assets must be transferred to the beneficiaries in aplanned manner or on specific events.

It isimportant to make sure that the beneficiary receives the assets atthe right age. A private Trust can help in addressing this issue aseven if the grandparent or settlor dies when the beneficiarygrandchild is a minor, the money would continue to be managed in theTrust till the child reaches an age where he/she has the maturity tohandle the significant assets.

Things to keep in mind

Like all financial goals, start early when planning for succession for a grandchild, also Earmark major events in your grandchild’s life,such as higher education or marriage, and make specific allocations and stipulations in a Trust.