Given that a lot of Indians are sitting on significant wealth, especially from stocks and real estate, proper Will and Nominations are a must. Sucheta Dalal tells you all that you need to know about this vital but ignored area of personal finance

Inheritance battles seem the norm for the rich and the famous, whether or not there is a Will involved. For want of a Will, Dhirubhai Ambani’s sons fought one of the bloodiest succession battles, although his fortune was vast enough to provide for several generations of Ambanis.

 On the other hand, Priyamvada Birla, the lady who shot to fame after her death, made a Will. But the fact that the widow of industrialist MP Birla stunningly bequeathed a Rs5,000-crore estate to RS Lodha (also deceased now), a financial advisor and auditor to the entire Birla group, set the cat among the Birla pigeons. The angry clan ganged up to contest the Will, even though the group had previously partitioned their assets.

DH Ambani did not make a Will and it created a problem. Priyamvada Birla made a Will and it still created a problem. But, by and large, a well-drafted, properly-executed Will ensures that your wishes are honoured, sometimes after a bitter battle among your heirs, various claimants to your estate and some tweaking by the court.

Wills of the rich and the famous almost inevitably land in court but that’s because they have money to spend. For us, it is a good idea to create a document which spells out what you wish, rather than have your estate distributed under various laws of inheritance. If you do it well, it won’t be easily contested. How should you go about it?

Why Make a Will?
Before we get into that, many Indians think making a Will brings bad luck, says Dr SD Israni, corporate law expert. He talks of a client, who prepares a Will and updates it frequently, but has not signed the documents for years, probably fearing bad luck.

Changing family structures and growing prosperity is forcing Indians to realise the importance of a Will. For instance, until recently, a significant part of the assets of middle-class families comprised the family home and some land; inheritance was decided by the laws of succession. Daughters got their share of family assets by way of dowry or streedhan.

Today, middle class senior citizens have significant self-acquired assets and want a say in their bequest. Among the younger generation, there are multiple marriages, inter-caste and inter-religious marriages and children from different spouses, which increase the importance of writing a Will, to avoid confusion over which succession law would apply. Increased awareness about the need for a Will is evident from the huge response to Moneylife Foundation’s three seminars on Wills.

Elders in traditional patriarchal Indian families, especially women, would bequeath their jewellery orally. It wasn’t unusual for the matriarch to say, “My (gold) bangle set will go to my elder daughter; my daughter-in-law will get the diamonds and my layered gold chain will go to my second daughter.”

Today, with nuclear families and children scattered across the globe, a wish list, even a written one, can never substitute a proper Will.

The authors of a well-known book called Trial & Heirs write about how Princess Diana made the mistake of leaving a ‘letter of wishes’ asking her executors to divide her personal property at their discretion but to give one-quarter to her godchildren. The executors apparently went to court against this ‘wish list’ and finally handed out peanuts to the godchildren. The lesson: “Don’t undermine your Will or trust by taking shortcuts,” say the authors. Instead, make sure you have a legally valid Will which is very specific about how cash and assets will be distributed.

Vimal Punmiya, an eminent tax, accounts and property law expert, says, “Making a Will is especially important if all your children are not all equal—financially or in terms of physical and emotional well-being. A person with a dependent widowed daughter, or a physically-challenged child, may want to make special provisions for them through a Will, over children who are better-off. This can only be done through a Will, because inheritance laws would treat all children equally.”

The inheritance laws applicable to you differ according to your religious affiliations. The Hindu Succession Act, 1956, applies to Hindus, Buddhists, Jains and Sikhs. The Indian Succession Act, 1925, is applicable to Christians while Zoroastrians and Muslims have different laws of inheritance based on their religious texts. Shias and Sunnis have different laws and Muslims are the only ones who can make an oral Will. If you want these laws not to apply to your case, you have to make a Will.

For some people, the big worry about making a Will too soon is, “What if I change my mind?” Well, you can change your Will as many times as you want to. The last one will be the one that is held valid on your death. But if you are in the habit of changing the Will frequently or to use your Will as an instrument to ensure your family’s devotion, then be careful to ensure that it’s complete each time.

How To Go about It?
Let’s start with some basics. At the core, it is a simple statement of your wishes. It must have your name, address, age and a declaration that you are in a sound medical state; it must be signed and attested by two witnesses in the presence of each other and the testator (the person making the Will).

Jayesh Desai, an associate at the law firm Singhi & Company, says, “The law does not prescribe the form or content of a Will. It can be handwritten or typed on plain paper. And you do not even need a lawyer to make a valid Will.”

Further, a Will does not require payment of stamp duty and registration. However, when it comes to actual transfer of your assets, large institutions and share-transfer agents prefer to depend on the Will that is registered.

Having said that, it is important that a ‘homemade’ Will is legible and comprehensive. It must have a complete list of your assets and liabilities and details of their distribution in simple, straightforward and easy-to-understand language. This is often easier said than done. Trial & Heirs narrates the story of a US Supreme Court judge who believed in such brevity that he wrote a Will that was just 176 words. His family was forced to spend thousands of dollars to have his Will clarified by a probate court. As the authors Danielle and Andrew Mayoras point out, even a judge does not necessarily have domain knowledge; so it makes sense to get a Will reviewed by a lawyer who specialises in the subject.

When it comes to a homemade Will, “The tricky part,” says Mr Punmiya, “is when you want to favour particular persons (say a neighbour or your favourite library) or disinherit a daughter who married against your wishes. In such situations, it is important that the Will provides full explanation for your wishes and action, just in case there is a battle over your assets.”  

Key People in the Process
While planning to make a Will, you need to start thinking about the key people, other than your heirs, who are crucial to the process. First, you need to think carefully about whom to appoint as executor to your Will. It must be a person whom you trust and who is rational and will have your best interest at heart. At the same time, if the executor is one of the beneficiaries, remember his position is compromised.

Again, Trial & Heirs provides a dramatic story to show how important it is to choose the right executor. Claudia Cohen, the divorced wife of millionaire Ronald Perelman, chairman of cosmetic giant Revlon, chose to appoint her ex-husband as the executor of her Will. When she died, Perelman dragged her old and paralysed father Robert Cohen to court, demanding a larger share of his estate. In doing it, he spent a few million dollars of his ex-wife’s money to sue her father!

Claudia Cohen had specifically requested that Perelman should not strain the relationship between the daughter and her father, but he ignored that too. All this suffering because she made the dreadful mistake of appointing Perelman as the executor of her Will.  

Apart from avoiding executors who may turn nasty or greedy, a commonsense approach is to choose an executor who is capable and familiar with legal formalities and is younger than the testator and has a higher probability of outliving him. The same is true of witnesses. While any two persons can be witnesses, ensure they are people who will turn up and vouch for your mental soundness if there is a dispute.

As Dr Israni says, it makes practical sense to select your witnesses carefully; for instance, a doctor’s opinion on your mental soundness is less likely to be contradicted and a lawyer or a chartered accountant would ensure correct legal procedure. It is also a smart idea not to have your heirs or beneficiaries as witnesses, because they get discredited if there is a dispute. While it is a good idea for your witnesses or executors to be confidants and know the content of your Will, it is not necessary for you to inform them. But again, learn from Vimal Punmiya’s client, who did not even tell his family that he had executed a Will and given it to Mr Punmiya for safekeeping. It was discovered only by chance, several months after the client’s death. So keep someone informed.

Learning from Disputes
Mr Punmiya recounts the story of a man who gave away big chunks of his estate to his daughters and planned on leaving the family home to his son, but died without making a Will. As it happened, the sisters immediately staked a claim to the home and the father ended up leaving a pile of woes for his son.

Greedy and unfair relatives are a problem the world over. In the US, grandchildren of the hotel heiress Leona Helmsley disputed her decision to leave $12 million to her dog and very little to them. The courts cut down the dog’s inheritance to just $2 million. The famous Frank Sinatra added what is called a ‘No Contest Clause’ to his Will. It said that anyone who contested his Will would be completely disinherited. We learn there was still a litigation over the Will—not about the bequests but because his last wife was needlessly delaying the distribution of his assets.

One of Mr Punmiya’s clients, from a royal family, was so certain that her relatives would question her Will and soundness of mind that she went to enormous lengths to record the process on videotape. From her signing of the Will to the entire entourage going over to the registration office to have it duly registered, everything was recorded.

If the Will is challenged, it would require a probate. Probate means getting a copy of the Will validated by a court. The process and rules differ from one state to another; but, in a nutshell, it is simply the act of getting the seal of a court on the contents. Typically, this simple act (where there are no disputes) has turned into a nightmare because of clogged courts and corruption.

In November 2010, Uday Dandavate, son of the former socialist leader and railway minister, the late Madhu Dandavate, finally went public about how the Bombay High Court had delayed the probate of his father’s Will for five years and how his lawyers hinted that it wouldn’t happen unless he paid a bribe. In an email to Moneylife, he says, “I am not budging. He (his father) led his life without taking any illegitimate money.”

For middle-class Indians, legal experts can often guide you on how to leave your assets without needing a probate. This can be done by using the nomination facility effectively.

However, as Ch Viswanath of Karvy Investor Services told Moneylife at a seminar in Pune, “Companies prefer a Will that is registered or sometimes require a probate.” The transmission of immovable property also requires a probate (which is why court officials make money by threatening delays). But, in Maharashtra, co-operative societies allow transmission of apartments through nomination as well.

What Is Nomination?
‘Nomination’ has different meanings depending on whether the asset is property, shares, insurance or bank accounts. In most cases (except shares, discussed later) nomination does not lead to ownership. A nominee gets a charge of the assets and acts as a trustee but will have to hand them over to the heirs if there is a Will. A nominee can also be an heir, but not necessarily. Most often, though, you nominate a person who you intend to be the beneficiary of a bank account, insurance policy or asset.

Mr Punmiya points out that the Supreme Court of India ruled in 1984 that “A nominee is a mere trustee with whom the (co-operative) society can initially deal after the death of a member. All the legal heirs of the deceased member have a right of succession to the property of the deceased member and a nominee cannot exclude the other legal heirs.”

If you hold shares in demat accounts, then remember the recent Bombay High Court judgement which held a nominee’s rights to be higher than those of an heir. Legal expert Dr Israni says that the wording of the amended Section (109A) of the Companies Act (dealing with nomination for shares) is such that the Bombay High Court judgement will probably be upheld by other courts as well, unless the government amends the badly-worded Section.

Section 109A (3) reads: “The nominee shall, on the death of the shareholder/s or holder/s of debentures of the company become entitled to all the rights in the shares or debentures… to the exclusion of all other persons.”

A Will is not something we think of. Even the rare few who are tracking their wealth are not thinking of it, though this number is growing, as our survey shows. But a Will is an essential component of your personal finance, especially since a lot of average people have become wealthy, thanks to the rising value of their financial assets and real estate. Make a Will now.

Know more about Wills

Some Important Terms

Will: A legally-valid document that enables you to choose who gets your self-earned assets after your death.

Testator: A person making the Will.

Legatee: A person who inherits under the Will.

Intestate: Person who dies without leaving a Will.

Law Applicable to Intestate Succession: For Hindus, Buddhists, Jains and Sikhs, the laws of inheritance have been codified in the Hindu Succession Act, 1956. For Christians, the Indian Succession Act, 1925, is applicable. Zoroastrians have a different law of inheritance. Similarly, Muslims have their own law. That has, however, not been codified in any legislation but is based on their religious texts. There are two major sects of Muslims—Shias and Sunnis. Both have different laws of inheritance.

Who Can Make a Will: A person who is not a minor and is of sound mind.

Finality of Will: A Will can be revoked any time and updated as many times, under the Indian Succession Act.

Codicil: Changes to a Will or explain certain provisions, without rewriting the entire Will. Must be signed by the testator and attested by two witnesses.

Other Benefits of a Will: Wills can be made for appointing executors, for creating trusts and for appointing testamentary guardians of minor children.

Testamentary Guardian: A guardian appointed through a Will. Single parents usually appoint testamentary guardians to take care of minor children, if something were to happen to the parents.

Executor: An executor is a person appointed by the testator to administer his/her Will. It is important that an executor agrees to perform this role, because otherwise the court appoints an administrator.

Registration: Registration is not mandatory but it provides strong legal evidence of proper execution of a Will.

Probate: It is the copy of a Will certified by a court, usually after checking, if other heirs have objections.

Nomination: A person can be nominated to take charge of assets such as bank accounts, insurance and flats in co-operative societies by filling the prescribed forms. A nominee is not necessarily the heir or beneficiary but only has the right to receive the asset.

Essential Components of a Will

* A Will has to be in writing.
* Only Muslims can make a valid oral Will. The law allows members of the armed forces engaged in actual warfare/expeditions and mariners at seas to make an oral Will. This is known as a ‘Privileged Will’.
* The law does not prescribe a format for a Will. It can be on plain paper and can be handwritten (ensure it is legible).
* A Will must list and document all your movable and immovable assets and clearly specify your bequests. It can be updated through a Codicil or can contain a ‘residual clause’ to cover assets that are not specifically mentioned or acquired later.
* You can only bequeath what you own. Providing proof of ownership of assets avoids disputes.
* A Will must be signed in the presence of at least two witnesses. Every page of the Will must be signed by the testator and initialled by the witnesses in each other’s presence.
* The Will must contain the name, address of the testator as well as those of the Witnesses. If an executor is appointed, he/she must be clearly identified to avoid ambiguity or confusion.

Kinds of Wills

Conditional or Contingent Will: They come into effect only if a certain event happens. A conditional Will is invalid if the condition imposed is invalid or contrary to law.

Joint Will: A joint Will by two persons is intended to take effect after the death of both; it will not be enforceable during the lifetime of either.

Mutual Will: Two testators confer reciprocal benefits—either of them constituting the other as his/her legatee. These are usually made by husband and wife.

Will Issues

While the respondents to our survey knew the basics, lack of deeper awareness was widespread

We conducted a survey of Moneylife readers to gauge their awareness of various aspects of Wills. Their information level on the basics of a Will was high (probably because they are Moneylife readers). As many as 96% (of the 740 respondents) believed that it is important to make a Will; only 2% said it invites bad luck to make a Will or that a Will cannot be changed, once made. However, lack of awareness was widespread on many other issues. For instance, 25% believe that it is mandatory to have a doctor as a witness (wrong) and 30% felt that nominations were a substitute for Wills (wrong). Also, as many as 46% are unaware of the landmark judgement of the Bombay High Court that a nominee mentioned in the demat account becomes the owner of shares. — Sucheta Dalal