Table of Contents

Table of Contents

Estate planning

Estate planning is a process that deals with the accumulation, conservation, and distribution of an individual’s estate. Its purpose is to enhance and maintain the financial security of individuals and their families. Here are some key points to keep in mind:

  • Estate planning is not just for the wealthy. Anyone who holds property and wishes to transfer it to specific heirs and in a specific manner needs estate planning.
  • The objectives of estate planning include preserving assets for loved ones, appointing a guardian for minors, addressing concerns arising from an individual’s disability, ensuring availability of funds to pay liabilities after death, and streamlining an efficient method to collect and distribute assets.
  • Effective estate planning should be done for families with minor children, individuals with high liabilities, properties in multiple states, owning a small business, estate taxes, and addressing the uncertainty of permanent disability.
  • Succession planning is planning for one’s business, which takes effect within one’s lifetime. It involves questions about viability, family involvement, and qualifications for taking over the business. Estate planning and succession planning are distinct with different objectives, but both are necessary for financial security.

What Constitutes Estate?

Sub-topic Information
What Constitutes Estate? – Estate consists of all the properties an individual owns or controls.
– It can be in different ownership formats such as sole ownership, partnership, joint agreement or trust.
– It includes any money or asset generated on a person’s death such as life insurance.
– Estate can be classified into three categories:
             – Gross Estate: Real estate, bank accounts, investments, retirement account, life insurance.
             – Residue Estate: Personal estate property such as car, jewellery, furniture, clothes, any other item found at one’s home, any investment not mentioned in the will or trust.
             – Estate Debt: All debts and obligations owed to others such as housing loan, car loan, credit card payments, business outstanding, tax liabilities and legal cases.
Consequences of dying intestate – A person is deemed to die intestate when he or she has not made a valid will or the will is incapable of taking effect.
– Consequences on distribution of properties when an individual dies intestate.
– Property devolves upon the heirs as per the laws of inheritance applicable to him/her.
– The law of inheritance varies according to religion:
             – Hindus, Buddhists, Jains and Sikhs: Hindu Succession Act, 1956.
             – Christians, Parsis and Jews: Indian Succession Act, 1925.
             – Muslims: Inheritance laws are based on religious texts where the laws are different for Shias and Sunnis.
Succession Certificate – When a person dies intestate, legal heirs have to apply to the civil court for obtaining a succession certificate.
– It is issued in accordance with the laws of succession applicable to the deceased.

Elements of Estate Planning-

Elements of Estate Planning Description
Will A legal document that specifies how an individual’s assets will be distributed after their death, including the appointment of guardians for minors or children with special needs.
Trust A legal arrangement that holds assets on behalf of a beneficiary or beneficiaries, with different types of trusts available, including testamentary trusts created in a will.
Power of Attorney A legal arrangement where an individual designates someone to manage their finances in case they become incapacitated or unable to do so. Often used by NRIs to designate someone in India to manage their assets.
Living Will An advance directive that states an individual’s wishes for end-of-life care in case they are unable to communicate their decisions, such as when they are terminally ill, seriously injured, in a coma, in the late stages of dementia, or near the end of life.
Nomination and Beneficiary Designations Appointing nominees and beneficiaries to ensure a smooth transfer of financial assets after an individual’s demise. Beneficial nominees can be appointed for assets such as life insurance, with parents, spouses, and children automatically becoming the Beneficial Nominee under the new Insurance act. It is important to periodically review nominations and beneficiary designations, particularly in the event of a change in marital status or legal beneficiaries.

Applicable Laws-

Indian Succession Act, 1925-

Religion Testamentary Succession Intestate Succession
Hindus Indian Succession Act, 1925 Hindu Succession Act, 1956 (as amended in 2005)
Muslims As per religion As per religion
Jains, Sikhs and Buddhists Indian Succession Act, 1925 Hindu Succession Act, 1956 (as amended in 2005)
Christians Indian Succession Act, 1925 Indian Succession Act, 1925

The Indian Succession Act, 1925 is applicable for testamentary succession for all religions except Muslims. For intestate succession, the Hindu Succession Act, 1956 (as amended in 2005) is applicable for Hindus, Jains, Sikhs and Buddhists. Muslims follow their own religious laws in both testamentary and intestate succession.

Hindu Succession Act, 1956:

Topic Summary
Application The Act extends to the whole of India except the State of Jammu and Kashmir.
Succession of Property of a Hindu Male Sections 8 to 13 of the Act lay down the general rules for succession when a Hindu male dies intestate.
Class 1 Heirs Legal heirs who fall under Class 1 heir include son, daughter, mother, widow, son of predeceased son, father of predeceased son, widow of predeceased son, son of predeceased daughter, daughter of predeceased daughter, son of predeceased son of a predeceased son, and daughter of predeceased son of predeceased son.
Class 2 Heirs Legal heirs who fall under Class 2 heir include father, son’s daughter’s son, son’s daughter’s daughter, brother, and sister.
Agnates One person is said to be an agnate to another if the two are related by blood or adoption wholly through males.
Cognates A person is said to be cognate to another if the two are related by blood or adoption but not wholly through males.
Full Blood Relationship Two persons are said to be of full blood relationship when they descended from a common ancestor by the same wife.
Half-Blood Relationship Two persons are related by half-blood when they have descended from a common ancestor but by different wives.
Uterine Blood Relationship Two persons are related to each other by uterine blood when they are descendants from a common ancestor by different husbands.
Relationship by Adoption An adopted child is treated as equivalent to a natural-born child.
Illegitimate Relationship Illegitimate relationship with the father is not recognized, but it is recognized with the mother.
Order of Succession Class 1 heirs will inherit simultaneously, and Class 2 heirs will inherit in the preferential order.
Distribution of Property Property is distributed to Class I heirs according to Section 10 of the Act, and to Class II heirs according to Section 11 of the Act.
Succession for Hindu Males The property of a male, dying intestate, devolves according to the provisions in Section 8 of the Act, and first upon the primary heirs, being the relatives in Class 1.

Muslim Personal Law-

Topic Notes
Law of Succession Combination of four sources: The Quran, Sunna, Ijma, and Qiya
Types of Heirs Sharers (entitled to a certain share of property) and Residuary (take the remaining share of property)
Sharers 12 sharers, such as husband, wife, daughter, father, etc.
Factors for Share Various factors decide the share of each sharer
Non-Testamentary Succession Governed by the Muslim Personal Law (Shariat) Application Act, 1937
Testamentary Succession Governed by relevant Muslim Sharia Law
Birth Right No concept of ancestor property rights by birth
Inheritance by Representation Per capita and per strip distribution
Joint Property No distinction between self-acquired or ancestral property
Rights of Females No distinction between men and women
Widow and Childless Widow Entitled to one-fourth and one-eighth of the deceased husband’s property, respectively.

Married Women’s Property Act, 1874:

Provisions of the Act Explanation
Insulation of properties of married women Under this Act, a woman’s properties are insulated from court attachments or income tax department attachments that the husband has run up.
Applicability of the Act The Act applies to any woman who at the time of her marriage professed the Hindu, Muhammadan, Buddhist, Sikh or Jain religion, or whose husband, at the time of such marriage, professed any of those religions.
Married woman’s earnings to be their separate property A woman’s earnings acquired after the passing of this Act in any employment, occupation, or trade carried on by her and not by her husband, and also any money or other property acquired by her through the exercise of any literary, artistic, or scientific skill, shall be deemed to be her separate property.
Policy of insurance A married woman may effect a policy of insurance on her own behalf and independently of her husband.
Insurance by husband for benefit of wife A policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife or his wife and children shall be deemed to be a trust for the benefit of his wife or his wife and children.
Legal proceedings by married women A married woman may maintain a suit in her own name for the recovery of her separate property and has the same remedies, both civil and criminal, against all persons, for the protection and security of such property, as if she were unmarried.
Wife’s liability for post-nuptial debts A person who enters into a contract with a married woman with reference to her separate property or on the faith that her obligation arising out of such contract will be satisfied out of her separate property, shall be entitled to sue her, and, to the extent of her separate property, to recover against her.
Husband not liable for wife’s ante-nuptial debts A husband married after the thirty-first day of December, 1865 shall not be liable to the debts of his wife contracted before marriage.
Extent of husband’s liability for wife’s breach of trust or devastation A husband shall not be liable for any breach of trust committed by his wife, or for any misapplication, loss or damage to the estate of the deceased caused or made by her, or for any loss to such estate arising from her neglect to get in any part of the property of the deceased, unless he acts or intermeddles in the trust or administration.


Topic Description
Definition Process of transferring property ownership from one person to another by changing the name in revenue records
Objective Maintain records of the rightful owner for tax purposes and grant permission for building plans
Handling Generally handled by state governments and land development authorities
Procedure Present owner must clear all dues and obligations before mutation can be recorded
Co-Owners If there are co-owners, mutation does not allow one person to claim the property alone
Proof of Title Mutation is not considered a proof of title and should not be the basis of acquiring land ownership

Succession under Hindu Succession Act:

Topic Description
Case Mr. XYZ has died without a Will, with 1 surviving brother and 2 surviving sisters
Class I Heirs Son, daughter, mother, widow, son of predeceased son, father of predeceased son, widow of predeceased son, son of predeceased daughter, daughter of predeceased daughter, son of predeceased son of a predeceased son, daughter of predeceased son of a predeceased son, widow of predeceased son of a predeceased son
Class II Heirs Relatives specified in Class II of the Schedule
Order of Devolution Class I heirs take simultaneously and to the exclusion of all other heirs; Class II heirs are preferred in order of entry in the Schedule
Mr. XYZ’s Case No Class I heir, so devolution will be to Class II heirs specified in the Schedule

Mock Tests-

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NISM-Series-X-B: Investment Adviser (Level 2) Certification

Chapter 14: Basics of Estate Planning

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1. Estate planning and succession planning

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2. Estate planning should be done effectively for

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3. What are the two main components of an estate plan?

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4. How is the relationship by adoption treated under the Hindu Succession Act?

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5. If you become ill and unable to manage your estate, who will take care of them?

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6. What is considered part of the residue estate?

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7. How does the Hindu Succession Act recognize illegitimate relationships?

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8. What is the purpose of property mutation?

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9. What is the general rule of succession for Hindu males dying intestate?

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10. Who are considered cognates under Hindu law?

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11. What is the purpose of a trust in estate planning?

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12. What is the role of the land development authority in the mutation process?

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13. What is included in the gross estate?

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14. Which law is applicable for intestate succession of Hindus?

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15. What is the purpose of periodic review of nominations and beneficiary designations in estate planning?

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16. Which law is applicable to Christians for both testamentary and intestate succession?

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17. According to the Hindu Succession Act, can adopted children be considered as heirs?

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18. What is the Indian Succession Act, 1925 primarily applicable to?

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19. What constitutes an estate?

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20. Which laws are applicable to Jains, Sikhs, and Buddhists for testamentary and intestate succession?

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21. What is the definition of full blood relationship under Hindu law?

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22. What is the purpose of granting a no-objection certificate or sanctioning the building plan during the mutation process?

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23. Estate planning is

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24. Caselet: Mr. XYZ has died without leaving a Will. He was not marrieHe has 1 surviving brother and 2 surviving sisters. The family is Hindu.

Question: Under the law who all qualify to inherit from the estate?

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25. What are the consequences of dying intestate?

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26. What is included in the estate debt?

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27. Which law governs the succession of property of a Hindu who dies intestate?

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28. Who generally handles the process of mutation?

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29. Can mutation alone allow one person to claim the property if there are co-owners?

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30. What is uterine blood relationship according to the Hindu Succession Act?

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31. How can a Will be used to appoint a guardian for minors or children with special needs?

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32. What does a Will specify?

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33. What is the purpose of a Living Will?

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34. In the Hindu Succession Act, which category of heirs inherit simultaneously and to the exclusion of all other heirs?

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35. The objectives of estate planning include

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36. Every individual needs to have an estate plan

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37. What is a Power of Attorney used for in estate planning?

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38. According to Section 11 of the Hindu Succession Act, how is the distribution of property among heirs in Class II determined?

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39. Which sections of the Hindu Succession Act, 1956 lay down the general rules for succession when a Hindu male dies intestate?

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40. According to Section 10 of the Hindu Succession Act, how is the distribution of property among heirs in Class I of the schedule determined?

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41. What needs to be done before the mutation can take place?

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42. What determines the value of mutation for a property?

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43. Which section of the Hindu Succession Act deals with the order of succession among the heirs specified in the schedule?

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44. How can legal heirs obtain a succession certificate?

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45. Succession planning for a business should be considered

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46. Estate planning deals with

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47. What legislation governs the law of inheritance for Christians, Parsis, and Jews?

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48. What is the significance of nomination and beneficiary designations in estate planning?

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49. What is the main objective of mutation?

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50. What is the purpose of a succession certificate?

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51. What is the definition of agnates under Hindu law?

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52. What happens during a mutation process in front of revenue authorities?

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53. Is a succession plan necessary if a person dies intestate?

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54. Is mutation considered as evidence to confer title of the property?

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55. What happens when you die – who inherit your assets and how?

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56. How is half-blood relationship defined under Hindu law?

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57. What is the difference between a trust and a testamentary trust?

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58. Why is estate planning required by individuals?

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59. What is the definition of dying intestate?

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