Estate planning is essential to minimise any issues that may arise at a future date with regards to both, immovable and movable property. Hence, if you are wondering what’s the best way to pass on your assets to your loved ones – Will or gift deed? –
Here are the Pros and Cons of Both the Routes
To make an informed decision, understand what these two legal routes are.
A Will, as defined under the Indian Succession Act, 1925 is the ‘written expression of the intention of the Testator (maker of the Will) as to the mode and manner of division of his/her properties (movable and/or immovable) to such person(s) as he/she may deem fit.’ A Will takes effect only upon the death of the Testator and not at any point of time prior thereto.
On the other hand, a gift is defined under the Transfer of Property Act, 1882 as the ‘transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.’ By implication, it follows that a gift deed is a document that evidences such a transfer and takes effect during the lifetime of the donor.
If you want to Bequeath your Assets through a Will, here’s how to make a Will
An individual, who is competent can bequeath his asset by making a Will. “While a Will need not be in a prescribed format, the following ought to be set out therein:
- The name(s) of Testator’s legatees/legal heirs/family members, if any;
- Appoint and name the person(s) as an ‘Executor’ who will carry out the directions and requests of the Testator in the Will for management and disposition of the assets there under;
- Details of all the assets, till then, owned/acquired by the Testator;
- Mode and manner of distribution of the Testator’s assets.
Besides, a Will is required to be executed by the Testator in the presence of two witnesses. While it is not necessary to register a Will to render it enforceable, it is advisable to get the same registered to minimise potential disputes amongst the heirs in future,” says Heena Chheda, partner, Economic Laws Practice.
Elaborating on the advantages associated with executing a Will, Chheda adds:
- The beneficiary under a Will is not liable to pay any income tax in respect of the asset bequeathed upon him/her;
- As a Will is neither required to be stamped nor is it required to be registered, the assets get passed on to the intended beneficiary with minimum cost;
- It gives flexibility and control to the Testator over his assets during his lifetime as a Will can be revoked and/or amended anytime by the Testator by executing a Codicil or a fresh Will.
However, there are different rules when it comes to Wills made by Christians and Parsis under the Succession Act, as compared to Wills made by Hindus, Buddhists, Sikhs and Jains. As far as Mohammedans (Muslims) are concerned, succession and inheritance are governed by Muslim personal laws. Therefore, it is your religious background, which determines the applicability of the rules.
“A probate is mandatory only if the Will has been made in Mumbai, Kolkata, or Chennai, or if the immovable property is situated therein. However, more often than not, Wills are contested by the beneficiaries and are thus subject to challenge before the Courts, thus indirectly requiring probate. The stamp duty payable on the grant of probate, varies from state to state, yet is still a substantial amount depending on the valuation of the totality of the properties contained in the Will,” mentions Pulkit Gupta, principal associate, Athena Legal.
If you want to Transfer your Asset through a Gift Deed, Here’s How to Create a Gift Deed
“In case of gift of immovable property, the transfer must be made by executing a gift deed and having the same attested by at least two witnesses. In the case of the gift of movable property, the transfer maybe made either by executing a registered document or by simply delivering/handing over the movable property by the donor to the donee. A gift must be accepted by the donee during the lifetime of the donor and while he is still capable of giving. In the event the donee dies before the gift is accepted, then the gift is void,” says Gerald Manoharan, partner, JSA.
Explaining who does a gift deed benefit, Gupta says, “A gift is transferred inter-vivos (a transfer made during the lifetime of the parties) and takes effect (subject to acceptance and/or delivery etc, as the case maybe) immediately upon the registration of the gift deed or immediately upon delivery and acceptance thereof in the case of movable property. Therefore, those looking to pre-empt any possible dispute amongst their heirs later may find the present route more convenient.”
According to Manoharan, unlike a Will, the gift requires to be stamped as per applicable stamp laws. If it is a gift of immovable property, it would have to be registered under the provisions of the Indian Registration Act, 1908. Manoharan further adds,
- “A gift once made usually cannot be revoked, unless the donor and donee agree that the gift can be revoked;
- The transfer of immovable property by way of a gift deed executed between relatives attracts nominal registration and stamp duty. Whereas transfer of assets among people (other than relatives) attracts stamp duty basis the market value of the asset being transferred;
- Where any person receives any immovable property by way of a gift, the stamp duty value of which exceeds Rs 50,000, then such stamp duty shall be chargeable and taxed (for the donee) under the ‘income from other sources provisions of the Income Tax Act, 1961. However, in the event such property is received from a relative such as a brother or sister, etc (as defined under the Tax Act), on the marriage of the individual, then it shall not attract any tax.”
Source – Times Property