Estate Planning

(Professional Development Program)

IMS Learning Resources Pvt Ltd. E-Block, 6th Floor, NCL Bandra Premises, Bandra Kurla Complex, Bandra (E). Mumbai 400 051 Tel No: +91 22 66680005 Fax No: +91 22 66680006 Email: help.fp@imsindia.com Website:www.imsindia.com

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PREFACE

The last element in the process of comprehensive financial planning is the distribution of wealth to ones dependants and decedents in the proportion desired. If done scientifically and systematically estate planning brings to the surface the Fallacy of the popular myth, " One should plan the distribution of the Estate only at the dying age or when sufficiently old." Proper estate planning should not only have income tax considerations, but also have legal, business and personal consideration. Estate planning is the means to develop the interlinkage between the generations by passing on this wealth and culture. This program on estate planning will help everyone to understand means, modes and techniques of estate planning at the right time and in right proportion considering the local taxation rules and regulations. This shall facilitate the dependents / descendants who receive the estate, to not lose part of it towards taxes and get the financial platform to further create and enhance the inherited wealth.

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Table of Contents
Chapter - 1 Chapter - 2 Chapter - 3 Chapter - 4 Chapter - 5 Chapter - 6 Chapter - 7 Chapter - 8 Chapter - 9 Chapter - 10 Chapter - 11 Introduction to Estate Planning ............................................................................... 8 Means of Estate Planning ..................................................................................... 13 Intestate Succession ............................................................................................ 30 Life Insurance ....................................................................................................... 41 Trusts ................................................................................................................... 45 Power of Attorney .................................................................................................. 67 Gifts ..................................................................................................................... 75 Partition ................................................................................................................ 78 Transfer of Property ............................................................................................... 81 Mortgage .............................................................................................................. 85 Mutation ............................................................................................................... 89

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Chapter 1

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Introduction to Estate Planning

any people are of the opinion that Estate Planning is an unpleasant and morbid subject. They are put it off because they are too busy, or because they think they dont own enough assets to plan for, or because they dont like to think about death. There is no doubt that Estate Planning can raise some difficult emotional issues. Unfortunately, ignoring these issues now may cost your family thousands or even millions of rupees later, as well as cause considerable anguish. Proper Estate Planning can give one tremendous peace of mind. How much do you own? It seems like a simple question, but often it is not. When most people think of what they own their estate they think about possessions such as their house, car, computer or jewellery. These are all part of their estate, but dont forget all of the other assets, such as the funds in your retirement plan or provident fund, the shares in stock market, certificate, or the life insurance policy that was taken out four years ago. In addition to identifying the clients assets in the estate, the financial planner must also identify and understand the amount or percentage of each asset that is owned, and the way in which the property is titled. The laws of each state in which these properties reside and the religion that he belongs to may affect ownership of the assets. Therefore, identifying every asset what it is, where it is, and its worth is crucial to the planning process. As a financial planner, you must have a basic understanding of how much is owned, and the different ways property can be transferred. Only then can you begin to address the clients estate planning needs. The starting point of a successful estate plan, as with any area of financial planning, is to identify and define the clients goals. Who will receive the assets, and when? How will the assets best be dispersed? These are just a few of the many questions that this course will address. What is Estate Planning? An estate is the total property, owned by an individual prior to distribution through a Trust or Will, for example real estate cars, household items, and bank accounts. Estate planning distributes the real estate and other personal property to an individuals heirs.

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Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death or incapacitation. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death. Wills and trusts are common ways in which individuals dispose of their wealth. Other tools are Power of Attorney, Gifts, Partition, Succession (When the Will is not made) etc. Trusts, unlike wills, have the benefit of avoiding probate, a lengthy and costly legal process that oversees the transfer of assets.

Financial Planning and Estate Planning Financial Planning is the process of meeting individual life goals through the proper management of ones finances. Life goals can include buying a house, saving for your childs higher education, planning for retirement or distribution of assets among beneficiaries. It is a strategy or a plan for how individuals can meet goals, given their current situation and their future plans. Estate Planning is a part of Financial Planning. Through Estate Planning, an individual can aspire to meet some goals of Financial Planning like distribution of assets among beneficiaries. It is the process by which an individual or a family arranges the transfer of assets in anticipation of death or incapacitation. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death. On the other hand, Financial Planning aims at the management of an individuals plans to meet his life goals.

Objectives of Estate Planning 1. Transfer of assets to beneficiaries: Almost all individuals want that their accumulated wealth should go to their beneficiaries. The beneficiary may be a family member, a friend or even other people in the society. The basic objective of Estate planning is that all this accumulated wealth should be transferred to the beneficiaries without the hassle of probation and tax deduction. 2. Paying least amount of taxes: When someone wants to distribute his/her wealth, his/her basic objective is that the maximum amount should go to the beneficiary with the minimum of tax deduction. 3. Planning for Incapacity: The primary objectives of Estate Planning are geared towards planning for incapacity. This helps in avoidance of the court controlled guardianship system and its incumbent costs in time and money while keeping control of the estate within the family by estate planning tools like Power of Attorney etc. 4. Orderly Business Succession: If someone owns a business, his Will should provide for a management succession plan, including who should operate the company in the short term. The Will should also provide for a buy/sell arrangement with existing shareholders or outside interests and should refer to an existing Buy-Sell Agreement, if one exists. If no Buy-Sell Agreement exists, consider drafting one so that his wishes regarding the disposition of his business at the time of his death can be followed. 5. Who Shall Receive and When? A properly prepared and executed Will designates beneficiaries of clients estate and considers alternate beneficiaries in the event the primary beneficiaries

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predecease the client. Often, certain personal things such as jewellery or artwork are designated to pass to certain people. Additionally, parents often desire to have assets pass to their minor children in Trust, with the principal to be disbursed upon the beneficiary reaching a particular age to protect against youthful indiscretions. 6. Selecting Executor, Trustee, and Guardian: An Executor is a clients personal representative after his death, and is responsible for such functions as: (a) administering the estate and distributing the assets to clients beneficiaries; (b) paying estate expenses and outstanding debts; (c) ensuring that all life insurance and retirement plan benefits are received; and (d) filing or hiring a person to file all necessary tax returns, and paying the appropriate central and state taxes from estate funds. When those duties are complete, this responsibility ends. A Trustee is required if the clients Will creates Trusts to accomplish more long-term goals, such as providing for minor children or giving to a charity or educational institutions. A clients Trustee is responsible for managing the Trusts assets and ensuring that the beneficiaries are provided for in accordance with the provisions of the Trust. Finally, a Guardian is appointed to act as a surrogate parent for the clients children, ensuring that the childrens best interests are served. Risk associated with failing to plan for Estate transfers

n n n n n n

Clients property transfer wishes go unfulfilled. Transfer taxes are excessive. Transfer costs are excessive. The clients family is not provided for financially in a proper manner. Insufficient liquidity to cover clients debts, taxes & costs at death. Time consuming and expensive Probate.

Basic steps of the Estate Planning Process 1. Establish the client/planner relationship: The financial planner should clearly explain or document the services to be provided to the client and define both his and the clients responsibilities. The planner should clarify payment arrangements i.e. how he will be paid and by whom. The client and the planner should agree on how long the professional relationship should last and how decisions will be made 2. Gather clients information: The financial planner should ask for information about the clients financial statement. The client and the planner should mutually define clients personal and charitable goals, understand his time frame for results and discuss, if relevant, how the client feels about risk. He should clearly understand the clients intentions and values. The financial planner should gather all the necessary documents before giving the client the advice he needs. In a nutshell, he should obtain the following information: i. Financial statement ii. Transfer of objectives: Family & Charitable iii.Intentions & Values

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3. Determine the clients financial status: The financial planner should analyze clients information to assess his current situation and the total worth of his estate to determine what he must do to meet clients goals. Depending on what services the client has requested, this may include analyzing assets, liabilities and cash flow, current insurance coverage, investments or tax strategies. 4. Develop a comprehensive plan of transfers consistent with all information and objectives: The financial planner should offer estate-planning recommendations that address clients objectives like transfer of assets to beneficiaries with the least amount of taxes. The planner should go over the recommendations with the client to help him understand them so that the client can make informed decisions. The planner should also listen to client concerns and revise the recommendations as appropriate. 5. Implement the Estate Plan: The client and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as clients coach, coordinating the whole process with the clients and other professionals such as attorneys or lawyers 6. Review the Estate Plan periodically: The client and the planner should agree on who will monitor the clients progress towards his goals. If the planner is in charge of the process, he should report to the client periodically to review the situation and adjust the recommendations, if needed, as the clients life changes. Means of Estate Planning Wills and Trusts are common means by which individuals perform their Estate Planning. Other means are Power of Attorney, gifts, partition, succession (when the Will is not made) etc. The Transfer of Property and Mutation are certain tools which help in the execution of these tasks. In the next chapter, we will explain the above mentioned approaches vehicles and their efficacy in executing an Estate Plan.

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Chapter 2

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Means of Estate Planning

Will Sussession Life Insurance Post Death T rust

Means of Estate Planning

During Lifetime

Power of Attorney Gift Partition

n this chapter, we will discuss the various means by which individuals can carry out Estate Planning. Estate Planning means are basically divided into two ways i.e. during ones lifetime and post death.There are certain tools which become effective during ones lifetime like Trust, Power of Attorney, Gift, Partition. Some tools which become effective only after death are Will, Succession and Life insurance. Among these, Trusts can also become effective after death by creating a Trust through ones Will. This type of Trust is called Testamentary Trust. Wills and Trusts are common means by which individuals achieve their Estate Planning. Other means are Power of Attorney, Gifts, Partition, Succession (when the Will is not made) etc. Will A Will is a document, which ensures that the wishes of an individual with respect to his assets and property are followed after his death. Problems and complications often arise when a person dies without a Will. The absence of a Will or the invalidity of a Will or parts of a Will often generates problems for the legal heirs and successors. Yet, many people put off making a Will, not realizing the predicament that this will put their family in, after their death. Its a little effort that goes a long way. A person, who owns property in any form, is definitely concerned about his property after his demise. A Will is an important document, which enables the individuals or any living person to rightfully leave their assets and wealth to whomever they choose after their death. In this way, a person can ensure that his wishes with respect to his assets and property are followed after his death. Introduction Section 2 (h) of the Indian Succession Act, 1925, defines Will as meaning the legal declaration of the intention of testator with respect to his property, which he desires to be carried into effect after his death. In other words, a Will or a Testament means a document made by a person whereby he disposes of his property, but such disposal comes into effect only after the death of the testator (A person who makes a Will).

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After the death of a person, a persons property devolves in two ways:

n According to the respective law of succession, when no Will is made- i.e. intestate n By way of Will i.e. testamentary
Law of Succession: The laws of inheritance are diverse and complicated. The rules of distribution of property in case a person dies without making a Will are defined by every Law of succession. These rules provide for a class of persons and percentage of property that will be inherited by such persons. It must be remembered that it is preferable that one should make a Will to ensure that ones actual intension is manifested. It often happens that due to ignorance of law, people fail to make a proper and enforceable will. Consequently, confusion ensues and often, the rightful heirs do not receive their fair share. When a male dies unexpectedly or where there has been a tragic demise and there is no Will, it often creates problems for the legal heirs and successors. This can result in unintended injustice. The property passes to the minor children, the surviving wife and to the mother of the deceased (although not on good terms) in equal shares. If there is an office or house, an equal share will go to the mother. Shares of companies are also divided equally. It is difficult to get all the heirs on a common meeting ground to write to the companies to transfer the shares to the names of the respective heirs. But all these problems can be obviated if a Will is left behind. According to the law of inheritance and succession, (a) If a Hindu male passes away: n n n Hindu female shares equally with the male i.e. a son and daughter will succeed with equal shares. The wife as well as the mother also gets an equal share. There is nothing to prevent a Hindu male from bequeathing his entire property to a stranger if he so desires.

(b) If a Muslim male passes away: n n n n n A Muslim male cannot will away more than 1/3rd of the estate i.e. 2/3rdof the property must be divided among the family members in the shares laid down in the Shariat Act, 1937. A Muslim wife cannot be dispossessed. She has to share with other wives if there is more than one wife. The widow gets a definite share. Mohammedan Law gives the male heirs, the sons, twice the share of the daughters.

The primary characteristics of a Will are the following: 1. Operation after Testators death: The primary ingredient of a Will is that it takes effect after the death of the testator. It means that whatever a testator writes in Will, will come into effect only after his death.

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Example Ram, a testator writes his Will stating that as soon as he falls ill after the age of 60 years, all his wealth should go to his son Mohan. This part of the Will is completely null and void because the effect of the Will takes place before the death of Testator. So, if Ram had mentioned that after his death all his wealth shall go to his son Mohan, his Will is completely valid in the sense that effects of the Will are after the death of testator. 2 It can be altered by testator or it is of an ambulatory nature: A Will can be altered or modified at any time by the testator during his lifetime. Example Ganshyamdas made a Will mentioning that all his wealth should go to his wife after his death. Later on, he modified the will mentioning that 2/3rd of his wealth shall go to his wife and remaining 1/3rd to his sister-in-law. 3. Revocability: The essence of every Will is that it is revocable (declare invalid) during the lifetime of the testator. Section 62 of the Indian Succession Act provides that a Will is liable to be revoked or altered by its maker at any time when he is competent to dispose of his property by Will. Any clause in a Will that the testator cannot revoke can make the Will void. Further, no third party can sue for the cancellation of a Will during the lifetime of the testator since the Will is liable to be revoked by the act of the testator himself. 4. Legal declaration: A Will is a legal declaration. Certain formalities must be complied with to make a valid Will. It must be signed and attested as required by law. 5. Disposition of property: There must be some property, which is being given to others after the death of the testator. Example A beggar Fakirchand made a Will, stating that after his death, all his good wishes will be with his son. Any clause like this cannot become part of a Will, because it does not include any property. Advantages and Disadvantages of a Will: Advantages of a Will: n n n n One can name the executor to legally represent him and honour the testators wishes. One can name the guardian(s) for his children and can specify the distribution of his estate. One can protect his familys financial future and provide funeral and burial instructions to limit the strain on those he leaves behind. One can specify the distribution of his estate, including donations to charities and gifts to friends and close family. One can attain peace of mind knowing that everything is in order should the unthinkable happen.

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n n

A Will can also minimize the taxes on estate and minimize the taxes for beneficiaries. It can avoid higher administration costs.

Disadvantages of a Will

n Subject to Probate proceedings: Probate means a process through which the Probate Court of the
district distributes the property of a deceased based on his Will or intestate property to the appropriate survivors. A Probate procedure consumes a lot of time and money n Becomes public record at the time of your death.

Kinds of Wills There are different kinds of Wills

Conditional & Contingent Will: Such Wills become enforceable only after the occurrence of a particular event. Example Mohandas made a Will mentioning that his son Pyarelal would be entitled to the flat in Mumbai after his death (death of testator) only if he becomes lawyer. If Pyarelal became a Chartered Accountant and not a lawyer, he will not be entitled to the flat after his father death. Thus, a Will may be expressed to take effect only in the event of the occurrence of a contingency or condition. If the contingency does not come to pass or the condition fails, the Will is not entitled to a Probate (The act of proving that an instrument purporting to be a Will was signed and executed in accord with legal requirements). Joint Will: Wills made by two or more persons are known as Joint Wills. They operate as if each person has executed a Will with regard to his own property. Such Wills operate on the death of each testator and the legatees (someone to whom a legacy is bequeathed) are entitled to the properties of the testator who dies as if these are two or more Wills constituting a single document. Joint Wills are revocable at any time by either of the testators during their joint lives, or after the death of one, by the survivor. The survivor is treated as the Trustee in the joint property if there is a contract that prevents the Will from being revoked. Mutual or Reciprocal Will: When two or more persons make a Will whereby they bequeath their properties to each other, it is known as reciprocal/mutual Will. Such Wills may be revoked by any of the testators during their joint lives, but it is necessary for that person to give prior notice to the other testators so as to enable them to make changes in their Wills. E.g. Rajesh and his wife Rajeshwari make a reciprocal Will bequeathing their properties to each other.

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Duplicate Will: A testator sometimes may execute a Will in duplicate, one kept by him and the other to be deposited in safe custody with a bank or an executor or Trustee. The testator for the sake of safety, makes a duplicate Will. However, in order to be valid, each copy must be duly signed and attested. If the testator destroys the part in his custody, it is revocation of both the Wills. Concurrent Will: A Testator generally makes one Will at the time of his death. But sometime for the sake of convenience, a testator may give away some properties in his native country by one Will and the other properties in another country by another Will. Such Wills may be treated as independent and Probate may be granted to one Will, unless there is any indication to the contrary. But if the Wills are relating to the properties in both the places, then both Wills must be included in the Probate. Sham Will: A document purporting to be a Will which is deliberately executed with all due formalities required for a valid Will can still be nullified if it is proved that the testator did not intend it to have any testamentary operation, but only intended to have some collateral object e.g. to induce another person to make him comply with the testators wish. This is because the Animus Testandi (An intention to make a testament or Will is required to make a valid Will) is essential to the validity of the Will and the same is wanting in such a case. Example Ramprakash wants to distribute his property equally among his wife and two sons, but in order to induce his younger son, Chotulal to become an Engineer, he makes a Will stating that if Chotulal becomes an Engineer, he is entitled to the whole of his property. In the above example, the Will is a Sham Will because Ramprakash (testator) did not intend to dispose all his wealth to his son. Holograph Will: A Holograph is a Will entirely in the handwriting of the testator. It is considered to be a very good form of Will, because it is in the handwriting of the testator and its authenticity is enhanced for the same reason. Privileged or Oral Will: This is valid in law only if it is made or executed by a soldier employed in an expedition or engaged in actual warfare or by an airman so employed or engaged or by a sailor at sea if he has completed the age of 18 years to dispose of his property by a Will. Such Wills may be in writing or by word of mouth. Who can make a Will? According to Section 59 of the Indian Succession Act, the following can make a Will:

n Any person of sound mind. n Any person who has reached the age of majority.
The following persons cannot make a Will:

n Lunatic and insane persons. n Minors i.e. below 18 years of age. In case a guardian is appointed to a minor, such a minor
reaches age of maturity only at the age of 21 years. n A person imprisoned in jail.

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Points to Remember Testamentary capacity: This capacity is found only in a sound disposing state of mind. It is essential for the testator to have sufficient capacity to comprehend perfectly:

n The conditions of his property. n His relationship with the persons who were/should/might have been the object of his property. n The scope and bearing of the provisions of his Will.
This, however, does not mean that, in order to make a Will, a person should have his mental conditions at his best and unaffected in any degree by old age or disease. Nevertheless, a testator should have sufficient memory and intelligence at the time of making a Will to take a proper judgment regarding the nature and effect of the disposition of his property. Soundness of mind: If a person is of unsound mind at the time of making a Will, such a Will is not enforceable. Soundness of mind denotes the mental capacity of the testator to recognioze what he is doing, his capacity to understand his extent of property, and his relationship with the person who should/ might have been the object of his property. However, soundness of mind does not depend upon age. Even a person of 100 years can write a Will, till he is proved incapable by medical evidence. Undue influence: Even a Will made by a person of sound mind but under undue influence will be declared void. To declare a Will valid, it is essential that the testator should be of sound mind, possess the discretion to manage his general affairs and not be influenced by any one while making Will. Content knowledge: It is imperative that the testator must have the knowledge of the contents of the Will which he executes. If the testator does not know about the contents of the Will, then it can be declared as void. Act cannot be delegated: A Will must be the testators own voluntary act. A testator cannot delegate his power to another person. Final will: The law is that in order to be effective, the Will should be the last and final Will of the testator. If a person writes a Will and subsequently writes another, then, the latter is termed as his last Will. Free agency of testator essential: Section 61 of the Indian Succession Act lays down that a Will or any part of a Will, the making of which has been caused by coercion or fraud, or by such importunity as takes away the free agency of the testator, is void. Right to property under a Will: Any person can be a devisee, including a minor or lunatic. Under Mohammedan law, a devise in favour of an heir is not valid without the consent of other heirs. Generally, the devisee need not give his assent in order that legacy transfer may take effect. Executor An executor is the person appointed ordinarily by the testator by his Will or Codicil. In other words, an executor is duty bound to distribute the assets of the testator as per the provisions of his Will. A Probate of a Will is granted only to an executor appointed by the Will.

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Who can be an Executor? All persons capable of executing a Will can be executors. Even a minor can be appointed an executor of a Will but a Probate cannot be granted to the minor until he attains majority. A testator can appoint one or more executors. The appointment of an executor may be absolute or for a limited purpose or limited time. An executor as such does not derive any benefit under the Will unless specifically provided for. However, as an executor has vast powers and the property vests in the executor until it is finally distributed to the legatees, it is advisable to appoint a responsible and accountable person/institution as an executor. The executor is primarily appointed to manage the estate of the deceased for the benefit of the beneficiaries/legatees under the Will. Legal status of the Executor The executor is the legal representative for all purposes of a deceased person and all the property of the testator vests in him until the property is distributed as per the provisions of the Will. The executor is entitled to represent the testator in any legal action (not including criminal or defamatory proceedings). For example, an executor can sue for recovery of the testators debts. It is only the legal estate of the deceased that vests in the executor and the vesting is not of beneficial interest. The property vests in the executor only for the purpose of representation and administration. Duties of an Executor:

n n n n n

To ascertain the assets of the deceased person. To pay testamentary and funeral expenses. To collect the debts and assets of the deceased. To pay the debts of the deceased. To apply for a Probate whenever necessary.

Applicable laws & Special provisions India has a well-developed system of succession laws that governs a persons property after his death. The Indian Succession Act 1925 applies expressly to Wills and Codicils made by Hindus, Buddhists, Sikhs, Jains, Parsis and Christians but not to Mohammedans as they are largely covered by Muslim Personal Law. The following laws are applicable-

n n n n n

The Indian Succession Act, 1925 Hindu Personal Laws Muslim Personal Laws The Indian Registration Act, 1908 Special Provisions

Hindus, Sikhs, Jains and Buddhists: A Will is not revoked upon the marriage of a Hindu, Sikh, Jain or Buddhists. The executor can also be the witness to the Will. A Probate is mandatory in the event that a Will is executed in the cities of Mumbai, Calcutta or Chennai, to the extent that the Will pertains to immovable property in Mumbai, Calcutta or Chennai.

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Parsis and Christians: A Probate is mandatory in the event that a Will is executed in the cities of Mumbai, Calcutta or Chennai, to the extent that the Will pertains to immovable property in Mumbai, Calcutta or Chennai. On the marriage of a Parsi or Christian testator, his/her Will stands revoked. Muslims: Muslim Personal Law governs a Muslim testators power to make a Will, the nature of the Will, its execution and attestation thereof etc. Under the Muslim Personal Law, a Muslim testator can make a Will orally or in writing and no form is required for such writing. However, it is preferable to have a written Will. If the Will is in writing, it need not be attested. It may be noted that the provisions of the Indian Succession Act do not generally apply to a Muslim testator unless specifically stated in the Act. In India, a person who is a major and of sound mind can make a Will and he can dispose of all or any part of his property by Will. However, there are two basic restrictions on the power of a Muslim testator to make a Will: n A Muslim can bequeath only one-third of his property by Will. The remaining two thirds must, in any case, be distributed according to rules of intestacy, unless there are no heirs at all claiming adversely to the legatees. If the bequeath is in excess of the one third of net assets, the consent of the heirs must be given after the death of the testators

A Muslim may change his Will during his lifetime or cancel any legacy. A Will may also become void if a Muslim testator after making the Will, becomes of unsound mind and continues to be so till his death. Similarly, a bequest which is contingent, or conditional or in the future or is alternative to another preexisting one is void. If the heirs are minors at the time of testators death, consent must be given only after attaining majority. A guardian is not competent to give consent on behalf of a minor. If an executor is appointed by a Muslim testator, the powers and duties of the executor will be in accordance with the provisions of the Indian Succession Act which have been discussed elsewhere. Codicil According to section 2 (b) of the India Succession Act, a Codicil is an instrument made in relation to a Will and explaining, altering or adding to its dispositions and shall be deemed to form part of the Will. Accordingly, a Codicil has to be executed and attested just as a Will. (Section 64, Indian Succession Act). For example, after a Will has been properly made in law, the testator may want to make some changes in the Will. Here, he may cancel the earlier Will and make a fresh Will incorporating the desired changes or he may alter only the relevant parts of the Will suitably by way of a Codicil. Such a Codicil will form part and parcel of the existing Will. A Codicil, to be valid, must be executed and attested in the same manner as a Will. It is a supplementary document to the Will and cannot be independent by itself.

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Some important points related to Codicil are as follows: n n n n It is an instrument made in relation to a Will. It explains, alters or adds to the dispositions of a Will. It shall be deemed to form part of the Will. The Testator may want to change the names of the Executors by adding some other names. In that case, this is done by making a Codicil in addition to the Will, as there may not be other changes required in the main text of the Will. The Testator may want to change certain bequests by adding to the names of the legatees or subtracting some of them, perhaps due to the death of the beneficiaries or the Executor. This can be done by making a Codicil. The Codicil must be reduced to writing. It must be signed by the Testator and attested by two Witnesses.

n n

Letter of Administration This is a certificate granted by the competent court to an administrator. Where there exists a Will: The administrator is authorised to administer the estate of the deceased in accordance with the Will. Where a Will does not name any executor An application can be filed in the court for grant of Letter of Administration for the property. And in accordance with law, where the deceased has died, intestate. Probate During a Probate, the copy of the Will is given to the executor, together with a certificate granted under the seal of the court and signed by one of the registrars, certifying that the Will has been proved. Some important points relating to a Probate are as follows: n n n n n n The application for Probate shall be made by petition to the court of competent jurisdiction. A copy of the last will and testament of the deceased should be annexed to the petition. The copy of the will and the copy of the grant of administration of the testators estate together form the Probate. It is conclusive evidence of the validity and due execution of the will and of the testamentary capacity of the testator. A Probate is obtained to authenticate the validity of the Will. The Probate is still the only proper evidence of the executors appointment.

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Probate in Detail What is a Probate? At death, the Will goes through Probate. Probate simply means the process by which the last Will is determined to be your final dispositive statement and which confirms the appointment of the person or institution the testator has named to administer his estate. The term Probate is also used in the larger sense of probating his estate. In this sense, Probate means the process by which assets are gathered, applied to pay debts, taxes and expenses of administration, and distributed to those designated as beneficiaries in the Will. The Executor or Personal Representative named in the Will is in charge of this process, and Probate provides an orderly method for administration of the estate. The executor is held accountable by the beneficiaries (and sometimes is supervised formally by a Probate court). The executor is entitled to a reasonable fee or commission. Probate law generally encourages or provides for partial distribution during the period of administration; assets may generally be distributed in kind rather than sold during this time. The tax laws generally focus the responsibility for death tax filings and payments on the executor under a Will. Thus, the choice of an executor is an important one. The basic job of administration and accounting for assets must be done whether the estate is handled by an executor in Probate or Probate is avoided. In the recent past, lawyers and other professionals have advocated the use of Probate avoidance techniques (including revocable Trusts) in states where the Probate process was perceived as being too slow and too costly. Many states have simplified or streamlined their Probate processes over the years. In such states, there is now less reason to employ such Probate avoidance techniques. The Probate Process On filing the Probate proceedings, all legal heirs will receive notices from the court for filing objections if any. If the heir does not appear before the court, it will be presumed that he has no objection to the grant of Probate. Children and spouses of the deceased brothers and sister can also file objections to the grant of Probate. A Will can only be challenged if: n n n n n It is not properly executed. It was not properly attested by the witnesses or the person in fact had not executed at all. The person who executed the Will was influenced by the beneficiaries. The beneficiaries had taken interest in the execution of the Will. Giving a statement of No Objection is not necessary but the presumption will be drawn as stated above. But if no objection is given in court, it would be better.

A Succession Certificate A Succession Certificate can be granted by the court to realize the debts and securities of the deceased and to give valid discharge. A Succession Certificate is a certificate when granted to the person, empowers the person to receive interest or dividends, negotiate the transfer or any of them with respect to the securities of a deceased person.

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P.S: Securities means any bond, stock, debenture or security The person is required to dispose of the amount so realized in accordance with the rights of the person entitled thereto. The person requiring the Succession Certificate may file an application in the court, where the properties of the deceaseds relative are situated or where he / she normally resided. Depending on the value of the estate of the deceased, the matter shall go to the type of court, which can conduct cases for that value [This is known as pecuniary jurisdiction of the court].This includes the names of all other heirs of the deceased as the respondents in the matter. A newspaper notice is also issued apart from mandatory notice to the respondents. Upon the expiry of the time period (normally 1 and a half months) from the date of publication of the notice after the respondents have given their No Objection, the court passes the orders for issuance of the Succession Certificate to the person/s making such an application. Judicial Stamp papers of sufficient amount (as per the prescribed court fees structure) are to be submitted in the court, where after the Certificate is typed by the court staff, duly signed and sealed and delivered. It takes about 3-4 months from the date of filing to receive your certificate. Will & Nomination n n n n The nominee merely acts as the Trustee. In some instances, the nominee and the beneficiary of the Will is the same person. At all times, the provisions of the Will shall prevail over the nomination. It is advisable to have the same person as the nominee and the beneficiary of the Will, so as to prevent future disputes. A nomination, in order to be effective, need not be executed as a Will but must be in accordance with the formalities required by the particular provision applicable.

Attestation of a Will n n n The testator shall sign or shall affix his mark to the Will, or some other person shall sign it in his presence and by his direction. The signature or mark of the testator, or the signature of the person signing shall appear clearly and should be legible. It should appear in the manner that is appropriate and makes the Will legal. The Will shall be attested by two or more witnesses, each of whom has seen the testator sign or affixed his mark to the Will or has seen other person sign the Will, in the presence and by the direction of the testator, or has received from the testator. Personal acknowledgement of testator signature or mark, or of the signature of such other person. Each of the witnesses shall sign the Will in the presence of the testator. Each of the witnesses shall sign the Will in the presence of the testator, but it should not be necessary that more than one witness be present at the same time, and no particular form of attestation shall be necessary.

n n

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Execution of a Will n n n n n n n n On the death of the testator, an executor of the Will or an heir of the deceased testator can apply for Probate. The court will ask the other heirs of the deceased if they have any objections to the Will. If there are no objections, the court will grant Probate. A Probate is a copy of a Will, certified by the court. A Probate is to be treated as conclusive evidence of the genuineness of a Will. In case any objections are raised by any of the heirs, a citation has to be served, calling upon them to consent. This has to be displayed prominently in the court. Thereafter, if no objection is received, the Probate will be granted. It is only after this that the Will comes into effect.

Forms & Formalities to make a Will Form of a Will There is no prescribed form of a Will. In order for it to be effective: n It needs to be properly signed and attested. n The Will must be initialed by the testator at the end of every page and next to any correction and alteration. Language of a Will n n n A Will can be written in any language. No technical words need to be used in a Will. The words used should be clear and unambiguous so that the intention of the testator is reflected in his Will.

Stamp Duty n n No stamp duty is required to be paid for executing a Will or a Codicil. A Will need not be made on stamp paper.

Attestation n n A Will must be attested by two witnesses who must witness the testator executing the Will. The witnesses should sign in the presence of each other and in the presence of the testator.

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n n

However, according to Hindu Law, a witness can be a legatee. Under Parsi and Christian law, a witness cannot be an executor or legatee. A Muslim is not required to have his Will attested if it is in writing.

Registration: n n n n n n n Under section 18 of the Registration Act, the registration of a Will is not compulsory. It is strong legal evidence that the proper parties had appeared before the registering officers and the latter had attested the same after ascertaining their identity. A Will must be proved as duly and validly executed, as required by the Indian Succession Act. Once a Will is registered, it is placed in the safe custody of the Registrar and therefore cannot be tampered with, destroyed, mutilated or stolen. It shall be released only to the testator himself or, after his death, to an authorised person who produces the Death Certificate. The cover should be superscribed with the name of the testator or his agent with a statement of the nature of the document. An amount of Rs.1,000/- will be charged as fee. The deposited cover may be withdrawn by the testator or his agent on payment of prescribed fee of Rs.200/-.

Effects of Registration and Non-Registration: Though a Will is not compulsorily registrable, the mere fact that a Will is not registered is not a circumstance to go against the genuineness of the Will. Revocation The essence of every Will is that it is revocable (declare invalid) during the lifetime of the testator. Section 62 of the Indian Succession Act provides that a Will is liable to be revoked or altered by its maker at any time when he is competent to dispose of his property by Will. Any clause in a Will that the testator cannot revoke can make the Will void. Modes of revocation: There are three modes of revocation of a Will as follows: 1. By another Will or Codicil 2. By destruction 3. By marriage

Proof of revocation: To prove that the Will had been revoked by the testator, it has to be proved that the testator had made another Will or Codicil or by some writing declaring his intention to revoke the will. Such a revocation can also be proved by burning, tearing or destroying the will by the testator or some other person in the testators presence and by his direction, thus clearly indicating his intention of revoking the Will. Testators capacity to revoke: A Will is easily revocable until the death of the testator. The testator must be of sound mind at the time of revocation. A revocation is not valid if the testator is insane at the time of revocation.

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Matters to be kept in mind while making a Will: n n n n Mention of the name and address of the testator and date of writing the Will. The intention must be very clear and unambiguous. The testator must clearly and in simple language specify his intention. Use of technical or difficult words must be avoided. Mention must be made of the fact that the Will is being made voluntarily and out of free will, without any coercion or undue pressure and under sound state of mind. The identity of the property being bequeathed must be very clearly specified and the identity of the person entitled to the property must also be very clearly specified giving details of his fathers name and relationship with the testator. The property being bequeathed must be legally bequeathable by the testator. The Will must state that it is the last Will of the testator and all previous Wills and Codicils have been cancelled or revoked. Each bequest of property must be in a new paragraph. The executor or executors, Trustees or guardians appointed by the Will must be clearly described and their powers defined and their previous consent to the appointment must be obtained. All obliterations, corrections, inter lineatlons or alterations in the Will or Codicil must be signed or initialed both by the testator as well as the witness. There must not be any blank spaces in the Will or Codicil. Each page of the Will or Codicil must be signed by the testator and attested by the witness. The Will must be attested by at least two witnesses, one of who may preferably be a doctor attesting to the sound state of mind of the testator at the time of making the Will.

n n n n n n n n

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Format of a Will I, ___________________________, son/ wife of _________________________ , resident of ________________________ age __ years, am making this will on the __ day of ________ _____ out of my free volition and without any coercion or undue influence whatsoever and state that this is my last Will and that I hereby revoke all Wills and Codicil made by me at any time heretofore. I bequeath my property, interests and other rights as follows: 1.I bequeath on my death to _______________________________, my title, interests, and all other rights which I have as owner of the residential / commercial property at _________________ I hereby state that he shall be entitled to use and enjoy the said property at his own will after my death. 2. I bequeath on my death the following ornaments and jewellery belonging to me to __________ :(give list of ornaments) 3. I bequeath on my death, cash balance lying with me at the time of my death to ______________. 4. I bequeath on my death, bank balance lying in my name at Savings / Current Bank Account No. _____ Bank of ______, _________________ Branch, ______ at the time of my death to _______________________________. 6. I bequeath the amounts receivable by me at the time of my death from various parties on various accounts to ____________________. 7. I bequeath the amounts and other valuables owned by me and lying in locker number _________ in my name at Bank_________, (Branch) at the time of my death to ___________. 8.I direct that a sum of rupees ________________ Only (Rs. _____/-) be set apart from my assets at the time of my death and be donated to a charitable Trust or persons whose aim and objective is to provide food, medical assistance, education assistance, etc to needy persons. 9. I direct that before distributing my assets in accordance with this will, all my debts, liabilities and monetary obligations including all testamentary expenses, costs, charges, expenses in respect of Probate and other legal charges at the time of my death be met out of my assets. 10.I bequeath all other residuary property, assets and other rights whether or not existing at the time of my death to _______________________________. I further state that my father, Mr. ______________________ is appointed as the executor of this Will. I declare that the executor shall have all the powers as may be necessary to execute this Will. I declare that I am the owner of the properties mentioned in this Will and am entitled to make this Will. I am of sound mind and health at the time of making this Will. In witness whereof, I have hereunto set and subscribed my hand and signature on this __ day of _____________.

Signed

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Signed by Mr. _______________on his last Will and testament, all being present at the same time. Thereafter at his request and in his presence, we subscribed our respective names and signatures as attesting witnesses all being also present at the same time. Signature of Witnesses 1. I have witnessed and read the aforesaid Will. Sign 2. I have witnessed and read the aforesaid Will. Sign 3. I have examined Mr. ______________ on the date of this Will and wish to state that he appears to be in of sound mind and sound mental health at the time of making the above Will.

Signature of doctor

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Chapter 3

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Intestate Succession

n the law that governs the succession of property of a male Hindu dying intestate, or without writing a will, the widow of a pre-deceased son is allowed a claim as strong as that of the son, daughter or widow. However, the claim of the widow of a pre-deceased son is rather vague when it comes to a female Hindu dying intestate. The Hindu Succession Act, 1956, has no place for the widowed daughter-in-law on the list of inheritors to the mother-in-laws property. First on the list are the womans sons, daughters and husband. If she was a widow, and left with no children, then the next claim goes to her husbands heirs, bypassing the daughter-in-law. However, in a civil appeal from a 1996 judgement of the Madras High Court, a two-judge bench of the Supreme Court, comprising Justice Sujata Manohar and Justice D.P. Wadhwa, has held that in order to decide who are the heirs of a female Hindu widow under Section 15(1)(b) of the Act, one does not have to go back to the date of the death of the husband to ascertain who were his heirs at that time. The heirs have to be ascertained ... at the time of the wifes death because the succession opens only at the time of her death. The appellant in the case, Seethalakshmi Ammal, is the daughter-in-law of the late Gomathi Ammal. Venkatarama Iyengar, Seethalakshmis husband, was the only child of Gomathi and her husband Sesha Iyengar. Venkatarama had expired before Gomathis death, leaving no child. Shesha Iyengar had died long back. When Seethalakshmi filed a suit for declaration of ownership of the properties left by Gomathi, Muthuvenkatarama Iyengar, son of Gomathis brother, contested the suit on the ground that Gomathi had made a will in his favour. The will was not accepted by the trial court, the first appellate court and by the high court on second appeal. However, the only reason why the high court allowed the second appeal was on the ground that Seethalakshmi was not an heir of her mother-in-law under the Hindu Succession Act. The high court judgement argued that Seethalakshmi wasnt quite the widow of the pre-deceased son, as defined in the Act because Venkatarama was alive at the time of his father Shesha Iyengars death. The Supreme Court judges have set aside the argument, and have allowed Seethalakshmis appeal, saying that the status of the heir must be determined at the time of the death of the female whose heirs are being ascertained. The judgement says that for Seethalakshmi to inherit her mother-in-laws property, it is enough for her to be the sons widow at the time of Gomathis death, regardless of whether the son had died before or after his fathers death. The misconception in the high court judgement, as pointed out by the Supreme Court, arises from the moot question of who are the heirs of a female Hindu dying intestate. The heirs of the male Hindu dying without writing his will are strictly classified in the schedule to the Act, with the widow of a pre-deceased son occupying a place among the class I heirs, meaning those who have first claim on the property. If only there is no heir in the class I will the choice fall on relatives in class II, a long list of seniority starting with father mother is class I and ending with mothers brother. However, the Act left little room for choice of successor in the case of a female Hindu, leading to the dispute over Gomathis property.

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The Hindu Succession Act is a remarkably thorough piece of legislation that reflects local customs in the states through a series of state amendments, defines the orders of succession among heirs in the typical large Indian families, and even sets the rule for who has survived whom in cases of simultaneous death the younger surviving the elder under the law, until the contrary is proved. However, the Act is still conservative in terms of gender justice, evident from the fact that the equality of share of the daughters inheritance to that of the son had to be specially laid down in a 1994 judgement of the Patna High Court (Tapeshwari Devi vs State of Bihar). Earlier, the Supreme Court, in a 1987 judgement, had to spell out that a property possessed by a Hindu woman would remain her absolute property and could in no way be a limited estate, like a property in which the owner may live but which she cannot dispose of. The latest Supreme Court judgement brings a new element the daughter-in-law into the complex web of Hindu succession. The Indian Succession Act came into operation on 30th September 1925 and it seeks to consolidate all Indian Laws relating to succession. It has no retrospective operation and is applicable to intestate and testamentary succession. A person is deemed to have died intestate in respect of the properties of which he has not made Will which is capable of taking effect or he has made a Will, but the Will is not capable of taking effect. For example, the person has bequeathed his own property for an illegal purpose or if the subject of the bequest is not existing. Intestacy is of two kinds, total or partial. The property of an intestate devolves upon the wife or husband or upon those who are related by blood or marriage to the deceased. The distribution of the property takes place as per personal law applicable to the deceased. The law of succession in India falls within the realm of personal law. Because of this, we have so many different succession laws, each purporting to reflect the diverse and differing aspirations, customs, and mores of the community to which the statute in question applies. We have the Hindu Succession Act, the Parsi Succession Act, the Indian Succession Act (which applies to Christians for the purposes with which we are now concerned), and even a Jaina Succession Act (which has of course now fallen into disuse, since Buddhists, Jains, and Sikhs are all now governed by the Hindu Succession Act). As far as Muslims are concerned, the law of succession falls into two broad streams, the Shia law of succession and the Hanafi law of succession. Both these laws of succession form part of the common law of India and are recognized as having the force of law by virtue of the Shariat Laws (Application) Act. The Hindu Succession Act is a striking departure from the pre-existing ancient Hindu law as had been codified by Manu. It provides a very just and equitable set of rules which cover the issues of succession to a Hindu male or a Hindu female who has died intestate, that is to say, without leaving behind a will. There are of course certain points where the pre-existing Hindu law has been codified without abrogation. The Indian Succession Act is largely a reflection of the British law as was in vogue at the time. The Hindu Succession Law The basic rules of succession as set out in the Hindu Succession Act: The Act: applies to Hindus (and this includes Buddhists, Jains and Sikhs as well). It includes also cults and sub-sects such as Arya Samaj, Ramakrishna Mission and the like. The Act deals with succession to a Hindu male separately and succession to Hindu females separately.

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The coparcenary property of a Hindu male who dies after the commencement of the Act without leaving behind any female heirs (or male heirs who claim through certain female relatives) will devolve upon the remaining male coparceners equally. This is called Survivorship. It is an exception to the general rule of succession. The female heirs whose presence would result in survivorship not taking place are the widow, the mother, the daughter, the daughter of a predeceased son, the widow of a predeceased son, the daughter of a predeceased son of a predeceased son and the widow of a predeceased son of a predeceased son. The existence of certain specified male heirs who claim through such female heirs would also result in the non application of the rule of survivorship. The female heirs who have been listed above are known as Class 1 female heirs. There are certain male heirs who also fall into this category known as Class 1. They are the son, the son of a predeceased son, the son of a predeceased daughter, and the son of a predeceased son of a predeceased son. Clubbed together, all these heirs are known as Class 1 heirs. If one or more Class 1 heirs survive a Hindu male, such heir or heirs would succeed to the property to the exclusion of all other relatives. Some interesting facts about the law of succession to Hindus. The Hindu law recognizes the right to succession of a child, which is enceinte, which is, not as yet born. Such a child succeeds to the estate of a person who died during the period of its gestation, upon its being born alive. The second interesting rule is that when two people die simultaneously, the younger is, by an artificial rule, presumed to die subsequent to the elder. The third interesting rule is that a murderer (or an abettor of a murder) will not succeed to the estate of the person who was murdered. Thus, spouses who plan to do away with each other as frequently as they seem to in the movies, would stand to gain little in reality, due to application of this rule. This brings us to the end of our very brief outline of the law of succession insofar as it pertains to Hindus. Another Explanation of Hindu Succession Law The Hindu Succession Act, 1956 Succession in the Hindus is governed by the Hindu Succession Act, 1956, which bases its rule of succession on the basic principle of propinquity, i.e., preference to heirs on the basis of proximity of relationship. Earlier females were excluded; however this rule of exclusion of females has been done away with. The law of Intestate Succession is concerned with matters as to who are the Heirs, what are the rules of preference among the various relations, in what manner is the property distributed in case there is more than one heir and so on. Intestate Succession - A person who dies without making a Will is known as intestate. A heir is a person entitled to inherit property after the death of the intestate. The Hindu Succession Act applies to the whole of India except the State of Jammu and Kashmir. The Act applies to all Hindus, Buddhists, Jainas, Sikhs and to any other person who is not a Muslim, Christian, Parsi or Jew.

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Special Marriage Act If a Hindu marries a non-Hindu under the Special Marriage Act, he shall be severed from the undivided family. However, if two persons who are Hindus get married under the Special Marriage Act, no such severance takes place. If a Hindu marries a non-Hindu under the Special Marriage Act, succession to the property of such person whose marriage is solemnized under this Act and to the property of the issue of such marriage shall be regulated by the provisions of the Indian Succession Act. However, if two persons who are Hindus get married under the Special Marriage Act, the above provision does not apply and they are governed by the Hindu Succession Act. Joint Family Property Under the Mitakshara School, the joint family property devolves by survivorship. When a male Hindu dies after the commencement of this Act, having at the time of his death an interest in a Mitakshara coparcenery property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenery and not in accordance with this Act. However, if the Mitakshara dies leaving behind a female relative or male relative claiming through Class I, this undivided interest will not devolve by survivorship but by succession as provided under the Act. General rules of succession - Male Hindus The property of the male Hindu dying intestate shall devolve in the following manner: Firstly upon all the heirs, being the relatives specified in Class I. Secondly, if there is no heir of Class I, then upon heirs being the relatives specified in Class II. Thirdly, if there is no heir of any of the classes, then upon the agnates of the deceased (a person is said to be agnate of another, if the two are related by blood or adoption wholly through males). Lastly, if there is no agnate, then upon the cognates of the deceased. (a person is said to be a cognate of another if the two are related by blood or adoption but not wholly through male). Class Ist heirs:

n n n n n n n n n n n n

Son Daughter Widow Mother Son of a predeceased son Daughter of predeceased son Widow of predeceased son Son of a predeceased daughter Daughter of predeceased daughter Son of predeceased son of predeceased son Daughter of predeceased son of a predeceased son Widow of predeceased son of a predeceased son

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CLASS IInd heirs:

n Father n Sons daughters son, (2) sons daughters daughter, (3) brother, (4) sister n Daughters sons son, (2) daughters sons daughter, (3) daughter daughters son, (4) n n n n n n
daughters daughter. Brothers son, (2) sisters son, (3) brothers daughter, (4) sisters daughter. Fathers father; fathers mother. Fathers widow; brothers widow. Fathers brother; fathers sister. Mothers father; mothers mother. Mothers brother; mothers sister.

Class I heirs take simultaneously to the exclusion of all other heirs. Heirs in the first entry of Class II shall be preferred to those in the second entry; those in the second entry shall be preferred to those in the third entry; and so on in succession. General rules of succession - Female Hindus The property of a female Hindu dying intestate shall devolve:

n Upon the sons and daughters (including the children of any predeceased son or daughter) and n n n n
the husband; Upon the heirs of the husband; Upon the mother and father; Upon the heirs of the father; and; Upon the heirs of the mother

However, if any property is inherited by a female Hindu from her father or mother, it shall devolve in the absence of any son of daughter of the deceased (including the children of any predeceased son or daughter) not upon the heirs referred to above but upon the heirs of the father; and any property inherited by a female Hindu from her Husband or from her father-in-law shall devolve, in the absence of any son or daughter of the deceased (including the children of any predeceased son or daughter) not upon their referred to above, but upon the heirs of the husband. The Muslim Succession Law The Muslim law of succession is a codification of the four sources of Islamic law, which are (1) The Holy Koran itself, (2) The Sunna that is, the practice of the Prophet, (3) The Ijma that is, the consensus of the learned men of the community on what should be the decision on a particular point, and (4) The Qiya that is, an analogical deduction of what is right and just in accordance with the good principles laid down by God. The Muslim law recognizes two types of heirs, the first being Sharers, and the second being Residuaries. A relative who is a Sharer will take a specified portion of the deceaseds estate irrespective of anything else. A relative who is a Residuary will take whatever is left over, once the Sharers have taken their specified shares.

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The Holy Book in Sura 4 Verse 7 says, From what is left by parents and close relatives, there is a share for men and a share for women, whether the property left behind be small or large and this share shall be fixed. The Sharers are 12 in number and are as follows: (1) Husband, (2) Wife, (3) Daughter, (4) Daughter of a son (or sons son or sons sons son and so on), (5) Father, (6) Paternal Grandfather, (7) Mother, (8) Grandmother on the male line, (9) Full sister (10) Consanguine sister, (11) Uterine sister, and (12) Uterine brother. Any attempt to set out the exact share of each such Sharer and its fluctuation depends on various factors. The share taken by each sharer will fluctuate in certain circumstances: A wife takes a one-fourth share in a case where the couple is without lineal descendants, and a one-eighth share otherwise. A husband (in the case of succession to the wifes estate) takes a half share in a case where the couple is without lineal descendants, and a one-fourth share otherwise. A sole daughter takes a half share. Where the deceased has left behind more than one daughter, all daughters jointly take two-thirds. However, these two rules apply only in cases where the deceased has left behind no sons. If the deceased had left behind son(s) and daughter(s), then, the daughters cease to be sharers and become Residuaries instead, with the residue being so distributed as to ensure that each son gets double of what each daughter gets. Lineal descendants (such as sons) exclude brothers and sisters, and therefore, the share of brothers and sisters (whether full, consanguine or uterine) will become nil in the presence of such descendants. Residuaries are those who are entitled to the estate, if any, left after the sharers have received their respective shares. Of course, this is only a broad rule and there are several just and equitable exceptions to this rule. For instance, the existence of certain relations who fall under the category of Residuaries has the effect of totally excluding certain other relations who fall under the category of Sharers. Example If a Muslim gentleman dies, leaving behind his widow, a sister and a son, one would expect that the widow and the sister, being Sharers, would first take their specified share (one eighth and one half respectively) and that the son would take the balance (A son is a residuary, as we shall presently see).However, this does not happen. What happens instead is that though the sister is a sharer, the existence of a son, totally excludes her, leaving her with no share at all. The effect of this is that the widow takes an eighth and the son takes the residue, that is to say, seven eighths. The list of Residuaries is quite lengthy. At the head of the list are the sons. Then, come their sons, and further lineal descendants in the pure male line, all of whom are Residuaries. Next in the list are the fathers, their fathers, and further lineal ascendants in the pure male line in that order. The next two entries in the list of Residuaries are full brothers and consanguine brothers. Then come those brothers sons, and the sons of those sons and further lineal descendants. Then come the full and consanguine brothers of the deceaseds father (that is to say, paternal uncles). Then come the sons of those paternal uncles, the sons of the sons of those paternal uncles and so on. Then, come paternal grand uncles who are related either fully or consanguinely.

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Now, the order of priority given in this list is very important. The reason for this is that a residuary higher up in the order, excludes all others below him in the order. Please also note that when there are certain corresponding female heirs for certain of the Residuaries (such as daughter-son, granddaughter-grandson and so on), then those female heirs succeed as Residuaries (giving up their share as sharers) and succeeding to the residue of the estate along with the listed Residuary, but only receiving half of what the male receives. Example For instance, a Muslim gentleman dies leaving behind his widow, a son, a daughter and a brother. From the table of Sharers, one would assume that his wife would take one-eighth, his daughter would take one half and that the residue would go to the son and brother. This does not happen. The widow takes the one eighth that she is entitled to. The daughter, in the presence of the son, ceases to be a sharer, and becomes a residuary, entitled to half of the extent of the residue that the son succeeds to. The son and daughter, being higher up in the table of Residuaries than the brother, exclude the gentlemans brother altogether. Thus, of the residue of seven-eighths, the son and daughter succeed in a 2:1 ratio, taking thereby, 7/12 and 7/24 respectively. Failing any Sharers or Residuaries, the next level of relations who would succeed to the estate of a deceased Muslim male or female, are a class of persons known as Distant Kindred. We do not propose to go into this at all, since this would only serve to lengthen what is already a long column. This is the law of succession to Muslim men and women who die intestate. Please note that there is no concept of ancestral property or rights by birth in the case of Muslim succession, as we had seen in the case of Hindu succession. The rights that a Muslims heirs acquire upon his death are fixed and determined with certainty on that date and do not fluctuate. Let me also refer to another very prominent case of the Nizam of Hyderabad and his model wife over divorce and inheritance rights for their daughter. It provides an interesting insight into the lives of the rich and the famous! Manolya Onur, the Nizams ex- his third wife claims that after their divorce, he had promised a mehr of $700,000 during the nikaah. He had also made an agreement in Geneva that the Chiran palace fort would go to Niloufer, their daughter, after his death. According to Manolya, the Nizam has hired six lawyers from London to fight the case, even though he claims that he does not have the money to pay for his daughters education. He has managed to pay $2 million for the restoring of the Chowmallah Palace, which they have opened to the public. They have also signed a contract with the Taj Group to convert Falaknuma Palace into a luxury hotel. Inspite of all this money coming in, when it comes to his daughter, he is penniless. Inspite of all the bickering and the hardship that Manolya went through, she has been awarded $3.4 million as divorce settlement. The court also directed the Turkey-based Nizam, grandson of seventh and last ruler of the erstwhile Hyderabad state, not to sell the Chiran and Falaknuma palaces here. It, however, refused to pass orders directing the handover of the Chiran palace to Niloufer. Indian Succession Act The Indian Succession Act (which applies to Christians for the purposes with which we are now concerned), is largely a reflection of the British law as was in vogue at the time.

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Intestate succession Intestate means when person dies without making a Will, which is capable of taking effect. The property devolves upon the wife or husband or upon the relatives of the deceased in the following manner: If A has left no Will - He has died intestate in respect of the whole of his property. A has left a Will, whereby he has appointed B his executor; but the will contains no other provisions A has died intestate in respect of the distribution of his property. A has bequeathed his whole property for an illegal purpose - A has died intestate in respect of the distribution of his property. When a Will is partially incapable of being operative: A has bequeathed Rs. 1000 to B and Rs. 1000 to the eldest son of C, and has made no other bequest; and has died leaving the sum of Rs. 2000 and no other property. C died before A without having ever had a son. A has died intestate in respect of the distribution of Rs.1000. Application Hindus, Muslims, Buddhist, Sikh, Jaina - This part does not apply to the property of any Hindu, Mohammedan, Buddhist, Sikh or Jaina. Muhammadans are governed by Mohammedan Law of Inheritance and the Hindus, Buddhists, Sikhs and Jainas by the Hindu Succession Act, 1956. Parsis The following provisions do not apply to Parsis: Special Marriage Act Notwithstanding anything contained in the Indian Succession Act with respect to its application to members of certain communities, succession to the property of any person whose marriage is solemnized under the Special Marriage Act and to the property of the issue of such marriage shall be regulated by the provisions of the Indian Succession Act. However, if two persons who are Hindus get married under the Special Marriage Act, the above provision does not apply and they are governed by the Hindu Succession Act. Distribution of property Widow / Widower The property of an intestate devolves upon the wife or husband, or upon those who are of the kindred of the deceased, in the order and according to the rules given below. However, remember that a widow is not entitled to the provision hereby made for her if, by a valid contract made before her marriage, she has been excluded from her distributive share of her husbands estate. Where intestate has left widow and lineal descendants ( a person who is in direct line to an ancestor, such as child, grandchild, great-grandchild and on forever), or widow and kindred only, or widow and no kindred, the following rules are applicable: Where the intestate has a widowIf he has also left any lineal descendants, one third of his property shall belong to his widow, and the remaining two-thirds shall go to his lineal descendants, according to the rules hereinafter contained; If he left no lineal descendant, but has left persons who are kindred to him, one-half of his property shall belong to his widow, and the other half shall go to those who are kindred to him, in the order

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and according to the rules hereinafter contained; If he has left none who are kindred to him, the whole of his property shall belong to his widow. Lineal descendants mean descendants born in lawful wedlock only. Where intestate has left no widow, and where he has left no kindredWhere the intestate has left no widow, his property shall go to his lineal descendants or to those who are kindred to him, not being lineal descendants, according to the rules hereinafter contained; and, if he has left none who are of kindred to him, it shall go to the Government. Rights of a Widower. A husband surviving his wife has the same rights in respect of her property, if she dies intestate, as a widow has in respect of her husbands property, if he dies intestate. Rules of distribution Children, Grandchildren Etc. The rules for the distribution of the intestates property (after deducting the widows share, if he has left a widow) amongst his lineal descendants (descendants born in lawful wedlock only) are as follows: Where intestate has left a child or children only Where the intestate has left surviving him, a child or children, but no other remote lineal descendant through a deceased child, the property shall belong to his surviving child, if there is only one, or shall be equally divided among all his surviving children. Child or children - The word child does not include an illegitimate child, but must be one born within lawful wedlock. The words any child mean and include children as well. Where intestate has left no child, but grandchild or grandchildren Where the intestate has not left surviving him any child, but has left a grandchild or grandchildren and no more remote descendant through a deceased grandchild, the property shall belong to his surviving grandchild if there is only one, or shall be equally divided among all his surviving grandchildren. Where intestate has left only great-grandchildren or remoter lineal descendants In like manner, the property shall go to the surviving lineal descendants who are nearest in degree to the intestate, where they are all in the degree of great-grandchildren to him, or are all in a more remote degree. Where intestate leaves lineal descendants not all in same degree of kindred to him, and those through whom the more remote are descended are dead. If the intestate has left lineal descendants who do not all stand in the same degree of kindred to him, and the persons through whom the more remote are descended from him are dead, the property shall be divided into such a number of equal shares as may correspond with the number of the lineal descendants of the intestate who either stood in the nearest degree of kindred to him at his decease, or, having been of the like degree of kindred to him, died before him, leaving lineal descendants who survived him.

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One of such shares shall be allotted to each of the lineal descendants who stood in the nearest degree of kindred to the intestate at his decease; and one of such shares shall be allotted in respect of each of such deceased lineal descendants; and the share allotted in respect of each of such deceased lineal descendants shall belong to his surviving child or children or more remote lineal descendants, as the case may be; such surviving child or children or more remote lineal descendants always taking the share which his or their parent or parents would have been entitled to respectively if such parent or parents had survived the intestate. Where an intestate has left no lineal descendants, the rules for the distribution of his property (after deducting the widows share, if he has left a widow) are as followsIf the intestates father is living, he shall succeed to the property. If the intestates father is dead, but the intestates mother is living, and if any brother or sister and the child or children of any brother or sister who may have died in the intestates lifetime are also living, then the mother and each living brother or sister, shall be entitled to the property in equal shares, such children (if more than one) taking in equal shares - only the shares which their respective parents would have taken if living at the intestates death. If the intestates father is dead, but the intestates mother is living, and the brothers and sisters are all dead, but all or any of them have left children who survived the intestate, the mother and the child or children of each deceased brother or sister shall be entitled to the property in equal shares, such children (if more than one) taking in equal shares - only the shares which their respective parents would have taken if living at the intestates death. If the intestates father is dead, but the intestates mother is living, and there is neither brother, nor sister, nor child of any brother or sister of the intestate, the property shall belong to the mother. Where the intestate has left neither lineal descendants, nor father, nor mother, the property shall be divided equally between his brothers and sisters and the child or children of such of them as may have died before him, such children (if more than one) taking in equal shares - only the shares which their respective parents would have taken if living at the intestates death. Where the intestate has left neither lineal descendants, nor parent, nor brother, nor sister, his property shall be divided equally among those of his relatives who are in the nearest degree of kindred to him.

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Chapter 4

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Life Insurance
et me narrate to you one of the very famous and most bitterly contested legal battles between the heirs of a Greek supermarket tycoon. Though this story does not deal with the inheritance of life insurance dues, highlights the point that fights over inheritance are found in every country, since time immemorial. Good estate planning is about ensuring the safety and security of your loved ones and ensuring that all of ones legacy is passed on as per ones wishes. To continue with the story,one of the brothers died young and had left all his dealings to be handled by his business partner and brother, as per his will. But the brother misused the trust and stole what was built jointly by his brother and him. Needless to say, he had not insured the future legacy in accordance with the legal requirements but entrusted his sibling to take care of it. His should be the brightest of success stories, the tale of an immigrants son who, through sheer toil and commitment, turned a tiny Lowell grocery into one of the nations most profitable supermarket chains, lifting it from near-bankruptcy to a spot on the Forbes 400. At his death bed, Telemachus A. Demoulas is left to reflect not on a legacy of success but on the ruins of his family. His reputation has been tarnished by a series of trials that found he had stolen more than $200 million in stock and real estate from the heirs he promised his dead brother he would protect. Now the Demoulas name is synonymous not with the value of hard work but with the most expensive, most protracted lawsuit in the history of Massachusetts. Born to Greek migrant parents who came to USA in 1906, it was Telemachus - the youngest son, known as Mike - who most took to the business. He persuaded his elder brother, George to join hands with him and then on, they began building new stores, one each year for the next 14 years. Mike and George became the closest of friends and their families the closest of families. In 1964, at the business headquarters with their wives, Mike and George made a bit of a ceremony of signing their wills, each naming the other as executor of his estate. They pledged that if anything happened to either brother, the other would take care of his children as if they were his own. It was unwritten, but firm. It seemed obvious. It was the most appropriate and brotherly thing to do! George was vacationing with his family in Greece on June 27, 1971, when his wife woke up on that Sunday morning and found him dead of a heart attack in their hotel room. He was only 51. Indeed, over the next 19 years, Mike seemed to abide by his promise to George. Georges son, Evan and Arthur were also inducted into the business. Something was amiss. They lodged a compliant. The complaint accused Mike of stealing stock and property in DeMoulas Supermarkets from his dead brothers estate, widow, and their children over the previous 20 years. The company that had been 50-50 for each brothers family at the time of Georges death was now 92 percent owned by Mikes. Of Georges heirs, only Arthur owned stock - a mere 8 percent of the company. Georges children say they had discovered all this only after Evan was called in to see the lawyers, when the state wanted them to pay some taxes on the sale of his stock. Evan didnt recall selling any stock. Like his siblings and his cousins, he had always had his returns prepared by his uncles lawyers. What they found, they would later assert in their lawsuit, was that six weeks after his brothers death, Mike had begun transferring

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Georges 50 percent stake in DeMoulas-owned property to himself. It began incrementally, but over the next 16 years, he would transfer all the real estate and 84 percent of the stock owned by Georges family to himself, paying his dead brothers heirs pennies on the dollar. Georges children acknowledged that they had signed many of the documents authorizing the transfers and the sales. But they had no idea what they were signing, they insisted. Even before their fathers death, they had become accustomed to signing whatever paperwork anyone from the family company put in front of them. They hadnt ever asked questions - what teenager would? What adult would, for that matter, having grown up trusting, respecting, and even fearing the uncle at the head of that company? Mike, the executor of his brothers estate, the trustee of his nieces and nephews inheritance, knew this, the complaint alleged, and capitalized on it. While he pretended to take care of them, he was taking advantage of their trust and respect. As the legal wrangle evolved, it went from bitter to bizarre. The key issues were whether Georges heirs knew they were selling their stock, whether Mike had paid a fair price, and whether he had been obligated, as the trustee of his brothers estate, to keep the business divided 50-50 between the two sides of the family. Appraisers testified that even if Georges children had signed documents selling their stock, Mike had bought it from them for a fraction of its true value. Handwriting experts were hired to show that on the documents sealing the largest of the stock transfers, Mike could have creatively used a photocopier to forge the signatures of Georges daughters. To Arthur, It has never been about money, he insists. To him, it is defending his fathers memory, the right to inherit the company his father promised him as an 8-year-old that he would one day head. He insists that he wanted to work in the company, that his uncle pushed him out. But with both sides easily able to afford paying astronomical legal fees, neither side needed to settle the case! Finally, After 813 days deliberation, the jury in the stock-transfer case agreed in 1994 with Georges heirs that Mike had taken advantage of them, and the judge ordered a controlling 51 percent of the company turned over to them. Life insurance is often a good estate-planning tool, because you pay relatively little up front, and your beneficiaries get much more when you die. When you name beneficiaries other than your estate, the money passes to them directly, without Probate. If most of your money is tied up in non-liquid assets like your company or real estate, life insurance gets cash into your beneficiaries hands without their having to resort to a fire sale of other assets. Though procedures vary by company, usually the beneficiaries receive their insurance proceeds promptly. Generally, the beneficiary informs the company in writing of the death, sends a copy of the death certificate, and receives a check, often within a few weeks. In general, the older you are, the less your family needs large amounts of life insurance. To decide how much to purchase, begin by estimating the long- and short-term needs of your survivors. Next, estimate what will be covered by other sources such as savings, a pension and other benefits. Youll want to buy enough life insurance to cover the difference. Term insurance provides protection not for your entire life, but only for a specified term of years; its cheap when youre young, but gets more expensive as you grow older. It can be a good idea, especially if youre relatively young or are starting a business venture; banks sometimes insist that an entrepreneurs life be covered by such a policy as a condition of advancing capital. Here are some examples of the long- and short-term needs your family may encounter. To really help minimize their worries, write up a plan with categories like these. Then, when the insurance proceeds

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are paid, your survivors will know exactly how to budget the money theyll be receiving Life insurance is an important part of many estate plans, and can be used for a number of functions, as we discuss below. In addition, one may use existing insurance for different purposes as he/she proceeds through different stages of their life:

n Protection for Family - Generally speaking, individuals first buy insurance as protection for
members of their family. For example, a client may want to ensure that he has sufficient life insurance to pay the mortgage on his home so that his family will not have to give up their home if he dies.

n Building an Estate - Once their children are older, many individuals still continue to hold insurance
as a means of building their estate. On the clients death, the proceeds of the policy can benefit a specific beneficiary or can be made payable to his estate, to be distributed in accordance with the instructions. In an important ruling: The Supreme Court has held that if a person holding a National Savings Certificate (NSC) or an insurance policy dies, his legal heirs would have the sole right over the money on maturity rather than the nominee mentioned in the certificate. A Bench comprising Mr Justice K.T. Thomas and Mr Justice R.P. Sethi said the nomination only indicated the person who was authorised to receive the money from the insurer. Any amount paid to the nominee after valid deductions becomes the estate of the deceased. Such an estate devolves upon all persons who are entitled to succession under law, custom or testament of the deceased holder, Mr Justice Sethi said writing the judgement for the Bench.

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Chapter 5

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Trusts

e all know the case of Priyamvada Birla who died without any heirs. The claim was that all the money of MP Birla and Priyamvada Birla was to go to charitable trusts, but Lodha, their accountant claimed that she willed all of it to him. This case has made it to the national newspapers many times. Let us briefly try to understand how the case proceeded and what were the contentious issues raised in the course of legal counsel. Advocate General Balai Ray submitted that the purported Will made by Priyamvada Birla on April 18, 1999, was forged. The immediate search of the office and residential premises of Lodha and others is absolutely necessary to retrieve documents like correspondences, passport, share certificates and others of Priyamvada Birla which is a must for the instant proceedings, said Mr Ray. Prior to that Will, both Mr M P Birla and Mrs Priyamvada Birla executed two mutual Wills. They were issueless and hence all their assets through the said mutual Wills were to go to charity. In the 1981 Mutual Wills of M P Birla and Priyamvada Birla, there were three executors. However, given the vastness of the estate, the Birla couple thought it prudent to increase the number of executors to four thereby executing a fresh set of reciprocal wills in 1982. This being their intention, B K Birla was appointed as the fourth executor in the Priyamvada Birlas 1982 Will . From the 1982 Mutual Wills, it is evident that the ultimate destination of the couples estate is charity. A suit has been filed to enforce the irrevocable agreement culminating in the said Wills. R S Lodha must hold the assets as a mere trustee till the executors of the 1982 Wills take over for the benefit of the beneficiaries mentioned therein. Discretion to set up trusts and societies has also been given to the executors of the Wills. In 1988, the Birla couple created five trusts. In 1990, Mr M P Birla died and on September 10, 1990, Mrs Priyamvada Birla nominated Hindustan Medical Institution, Eastern India Educational Institution and M P Birla Foundation as beneficiaries of their property. Lodha failed to submit any evidence that Trusts were dissolved except one letter allegedly written by Priyamvada Birla informing the Income Tax authorities about the alleged dissolution of the Trusts. Also, Mr Ray submitted that the Calcutta High Court appointed Special Officers to conduct inventory of Priyamvada Birlas assets and found a veritable treasure trove comprising of jewellery, gold coins and other items that were not disclosed by Lodha. Earlier, Mr K K Birla, was one of the named executors of the 1982 Mutual Will of Mr M P Birla. Senior counsel appearing for K.K. Birla, asserted that a suit had been filed against the propounder of the bogus 1999 Will disentitling him to deal with the estate of Priyamvada Birla in a manner inconsistent with the provisions of her 1982 Will and for other consequential reliefs. The estate of Ms Priyamvada Birla is valued at a staggering Rs 5000 crore. After inventory at her residence by the Joint Special Officers, assets worth crores were recovered. The counsel said that 1999 Will had been challenged on all conceivable grounds. It is the most unnatural Will where under everything has

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been bequeathed to Mr R S Lodha, to the exclusion of all others, who was in a fiduciary position vis-a-vis the deceased lady. Sirkar, senior counsel of BK. Birla states,From the 1982 Mutual Wills, it is evident that the ultimate destination of the couples estate is charity. A suit has been filed to enforce the irrevocable agreement culminating in the said Wills. R S Lodha must hold the assets as a mere trustee till the executors of the 1982 Wills take over for the benefit of the beneficiaries mentioned therein. Discretion to set up trusts and societies has also been given to the executors of the Wills, he added. The court case has been long and tedious and to say the least, most time consuming. The rightful inheritors, whether charity trusts or RS Lodha, will be decided by the courts, based on the evidence submitted. Setting up a Trust is another means of Estate Planning. A Trust is an entity created to hold assets for the benefit of certain persons or entities (beneficiaries), with a Trustee managing the Trust (and often holding title on behalf of the Trust). Most Trusts are founded by the persons (called Trustors, settlors and/or donors) who execute a written Declaration of Trust, which establishes the Trust and spells out the terms and conditions upon which it will be conducted. The Declaration also names the original Trustee or Trustees, successor Trustees, or means to choose future Trustees. The assets of the Trust are usually given to the Trust by the creators, although assets may be added by others. During the life of the Trust, profits and, sometimes, a portion of the principal (called corpus) may be distributed to the beneficiaries, and at some time in the future (such as the death of the last Trustor or settlor) the remaining assets will be distributed to beneficiaries. A Trust may take the place of a will and avoid Probate (management of an estate with court supervision) by providing for distribution of all assets originally owned by the Trustors or settlors, upon their death. There are numerous types of Trusts, including revocable Trusts created to handle the Trustors assets (with the Trustor acting as initial Trustee), charitable Trust which provides for eventual guaranteed distribution of the corpus (assets) to charity, thus gaining a substantial tax benefit. A testamentary Trust can be created by a Will to manage assets given to beneficiaries Introduction Section 3 of the Indian Trusts Act, 1882, defines a Trust: A Trust is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner:

n author of the Trust: Trustee: beneficiary: Trust property: beneficial interest: instrument
of Trust The person who reposes or declares the confidence is called the author of the Trust. The person who accepts the confidence is called the Trustee. The person for whose benefit the confidence is accepted is called the beneficiary. The subject-matter of the Trust is called Trust-property or Trust-money: The beneficial interest or interest of the beneficiary is his right against the Trustee as owner of the Trust-property;

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And the instrument, if any, by which the Trust is declared is called the instrument of Trust.

n Breach of Trust: a breach of any duty imposed on a Trustee, as such, by any law for the time
being in force, is called a breach of Trust.

n Registered: and in this Act, unless there be something repugnant in the subject or context,
registered means registered under the law for the registration of documents for the time being in force. n Notice: a person is said to have notice of a fact either when he actually knows that fact or when, but for willful abstention from inquiry or gross negligence, he would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Indian Contract Act, 1872 (9 of 1872), section 229. Advantages and Disadvantages of a Trust: Advantages of a Trust

n The biggest advantage of the Trust is that any property transferred to the Trust during your
lifetime will pass directly to the beneficiaries of the Trust. The Trust property will not have to go through a Probate court. The advantages of avoiding Probate are that:

No Probate fees are due on property passing outside of Probate The property will pass immediately to the beneficiaries. The terms of the Trust remain private.

(Keep in mind that property disposed of by a Will passes through Probate and is therefore subject to Probate fees and delays are normally associated with Probate. Furthermore, when a Will is probated, it becomes a public document that can be obtained and read by anyone.)

n A Trust is also a good way to make gifts to minor children or to provide for the care of elderly
parents. It is also used by people getting on in years who are concerned with their own possible future incapacity. n Saving on Taxes: The growth on assets, such as shares, transferred to a Trust is not subject to taxes, because the growth belongs to the Trust. Disadvantages of a Trust

n Firstly, the need to draft a Trust document. n Secondly, the loss of legal control of assets. All assets are handed over to the Trust and are
managed by the Trustees for the benefit of the beneficiaries. Author of the Trust can no longer own the assets, but he can exercise some control over them by being a Trustee. The three main uses of a Trust are:

n To freeze the value of an estate which has a high asset value. In other words, if the author of the
Trust transfers an asset to a Trust, the assets value does not grow in his hands, which would increase the amount of Trust that will have to be paid on his death. n To hold and protect assets for minors/incapacitated dependants. n To protect assets in the event of insolvency. Creditors cannot claim money held in a Trust.

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Types of Trust:

Types of Trust on the basis of intention

n An Express Trust is a Trust created by a Settlor expressing his intention to create a Trust with
reasonable certainty.

n An Implied Trust is a Trust implied from the words of an instrument or from the conduct of the
parties. An implied Trust is founded on an unexpressed but presumed intention of the party creating it.

n A Constructive Trust arises by operation of Law. Section 86 to 93 of the Indian Trusts Act are
cases of constructive Trusts. Section 69 of the Transfer of Property Act, 1882 provides that the money received by the mortgagee arising from the sale of the mortgaged property shall, in the absence of a contract to the contrary, be held by him in Trust to be applied as provided in that section. Another example of a Trust arising by operation of Law is Section 6 of the Married Womens Property Act, 1874, which provides that a policy of insurance effected by a married man on his own life, and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall ensure and be deemed to be a Trust for the benefit of his wife, or of his wife and children, or any of them, according to the interest so expressed, and shall not so long as any object of the Trust remains, be subject to the control of the husband, or his creditors, or form part of his estate. A Constructive Trust is imposed in circumstances where it is unconscionable for the Owner of a property to hold it for his own benefit, irrespective of the intentions of the concerned parties. When a person clothed with fiduciary character gains some personal advantage by availing himself of the situation, he is obliged to hold such advantage in Trust. A person who has knowingly assisted in a dishonest and fraudulent design of the Trustees to misapply the Trust funds, is treated as a Constructive Trust and is personally liable to account.

n A Resulting Trust. When a Trust is implied in favour of the party creating it, it is called a Resulting
Trust.

n A Precatory Trust is a Trust established by expressions of confidence, request or desire that

property will be applied for the benefit of a definite person or object, where such words are construed as constituting a Trust. Type of Trusts on the basis of purpose

n Private Trust: A Trust is termed private in nature if it is created for the benefit of specific
individuals; that is, individuals who are defined and ascertained individuals or who within a definite time can be definitely ascertained.

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n Public Trust: If however, the Trust is created for the benefit of an uncertain and fluctuating
body of persons who cannot be ascertained at any point of time, for instance the public at large or a section of public following a particular religion, profession or faith, the Trust is termed as public Trust. Such a Trust is generally a non-profit venture with a charitable objective and in such cases, it is also referred to as the Charitable Trust.

n Religious Trust: A Trust created for religious purposes is termed as a religious Trust and it can
be either a private or a public Trust. A religious endowment made via Trustees to a specified person is a private Trust and the one to the general public or a section thereof is a public Trust. Differences between a Private Trust and a Public Trust In Private Trusts, the beneficiaries are defined and ascertainable persons. Public Trusts are constituted for the benefit of the public at large. The author of a Public Trust may restrict the benefit to a particular group or section of society, such as caste, class, creed, sex, age etc. A Public Trust is of a permanent and indefinite nature. The certainties to constitute a valid Trust may be summarized as under:

n Certainty of intention to create a Trust: The intention of the author of the Trust to create a
Trust should be apparent, unambiguous and not capable of doubt. The best form of expression of such intention should be creation of Trust evidenced by a written document, though it is not mandatory for the creation of the Trust. The only requirement is that the author should express it in words or by conduct, his final and definite intention to create a Trust. The author of the Trust must use definite words to indicate: That he intends to constitute a Trust adhering to law on himself or the person to whom the property is given; That he intends to benefit a definite person or persons in a definite way; That he intends to hold definite property by the Trust. Certainty of the purpose of the Trust: The purpose of Trust should also be certain. In the case of uncertainties of the purpose of the Trust, the Trust would be void. The purpose of the Trust may be to benefit certain persons or it may be for the benefit of public at large. However, if the choice of charitable objectives is left to the Trustees of a Trust for the charitable purposes, it would not invalidate the Trust on that ground. Certainty as to beneficiary: The beneficiaries of the Trust should be definite and identifiable persons. Any uncertainties, ambiguity or vagueness as to who are the beneficiaries would invalidate the Trust.

a. b. c.

Example A bequeaths certain property to B hoping he will continue it in the family. This does not create a Trust, as the beneficiary is not indicated with reasonable certainty.

n Certainty as to Trust property: The Trust property should be clear and identifiable.
Example A bequeaths certain property to B, desiring him to divide the bulk of it among Cs children. This does not create a Trust, for the Trust-property is not indicated with sufficient certainty.

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Formation of Public, Religious & Charitable Trusts If the Trust is created for the benefit of an uncertain and fluctuating body of persons who cannot be ascertained at any point of time, for instance the Public at large or a section of public following a particular religion, profession or faith, the Trust is termed as public Trust. Such a Trust is generally a non-profit venture with charitable objective and in such cases, it is also referred to as the charitable Trust. A Trust created for religious purposes is termed as a Religious Trust and it can be either a Private or a Public Trust. A religious endowment made via Trustees to a specified person is a Private Trust and the one to the general public or a section thereof is a Public Trust. Introduction A public charitable or religious institution can be formed either as a Trust or as a Society or as a Company registered u/s 25 of the Companies Act. It generally takes the form of a Trust when primarily one or more persons form it. To form a Society, at least seven persons are required. Institutions engaged in promotion of art, culture, commerce etc. are often registered as non-profit companies. These forms are enumerated as under:

n Charitable Trust settled by a settlor by a Trust Deed or under a Will. n Charitable or religious institution / association can be formed as a society. n Charitable institution can be formed by registering as a company u/s 25 of the Companies Act,
1956, as non-profit company (without addition to their name, the word Limited or Private Limited). Who can form a Charitable or Religious Trust? As per section 7 of the Indian Trusts Act, a Trust can be formed By every person competent to contract. By or on behalf of a minor, with the permission of a principal civil court of original jurisdiction. However, this is subject in each case to the law for the time being in force as to the circumstances and extent to which the Author of the Trust may dispose of the Trust property. A person competent to contract is defined in section 11 of the Indian Contract Act as a person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Thus, generally speaking, any person competent to contract and competent to deal with property can form a Trust. Besides individuals, a body of individuals or an artificial person such as an association of persons, an institution, a limited company, a Hindu undivided family through its Karta, can also form a Trust. It may, however, be noted that the Indian Trusts Act does not apply to public Trusts which can be formed by any person under general law. Under the Hindu Law, any Hindu can create a Hindu endowment and under the Muslim law, any Muslim can create a public Wakf. Public Trusts are essentially of charitable or religious nature, and can be constituted by any person. Capacity to create a Trust As a general rule, any person, who has power of disposition over a property, has capacity to create a Trust of such property. According to section 7 of the Transfer of Property Act, 1882, a person who is

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competent to contract and entitled to transfer the property or authorised to dispose of transferable property not his own, either wholly or in part and either absolutely or conditionally, has power of disposition of property. Thus, two basic things are required for being capable of forming a Trust n n Power of disposition over property; and Competence to contract

Who can be a Trustee? Every person capable of holding property can become a Trustee. However, where the Trust involves the exercise of discretion, he can accept or act as a Trustee only if he is competent to contract. No one is bound to accept Trusteeship. Any number of persons may be appointed as Trustees. However, no Trust is defeated for want of a Trustee. Where there is no Trustee in existence, an official Trustee may be appointed by the court and the Trust can be administered. An executor of a Will may become a Trustee by his dealing with the assets under the provisions of the Will. When an executor is functus officio to any of the assets and yet retains them, he becomes a Trustee in respect of those assets. Who can be a Beneficiary? In a Private Trust, the beneficiaries are one or more ascertainable individuals. In a Public Trust, the beneficiaries are a body of uncertain or fluctuating individuals and may consist of a class of the public or the whole public. Generally, a Private Trust is not a permanent one. But a Public Trust is of a permanent nature. If properties are dedicated to temples and mosques or gifts are made to religious or charitable institutions, they create a Trust. Points to Remember Every person capable of holding property may be a beneficiary (Section 9). Any person capable in law of holding property or an interest in property, is to the same extent capable of acquiring a beneficial interest as a beneficiary under a Trust of that property or interest. A minor, though incompetent to contract, is capable of holding property and a valid Trust can be created for the benefit of a minor. Unincorporated Associations, Clubs and Societies are not legal persons capable of holding interest in property and therefore, there cannot be a Trust for an unincorporated Association, Club or Society. However, a Trust for an unincorporated Association may be construed as a gift to its members. Under Sections 13 to 16 of the Transfer of Property Act, 1882 and Section 113 of the Indian Succession Act, 1925, a Trust can be created in favour of an unborn person provided rule against perpetuity is not violated. A sole beneficiary cannot himself be a Trustee, but a Trustee can be one of the beneficiaries. Subject matter of a Trust Any property capable of being transferred can be a subject matter of a Trust. Section 8 of the Indian Trust Act, however, provides that mere beneficial interest under a subsisting Trust cannot be made the subject matter of another Trust.

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In the case of J.K. Trust vs. CIT (1957) 32 ITR 535 (S.C.), the Supreme Court had held that the word property under the Trusts Act is of the widest import and a business undertaking will undoubtedly be a property so that a running business can be made a subject matter of Trust. This view has been followed in the case of in CIT vs. P. Krishna Warriar (1964) 53 ITR 176 (SC). Business may be a taboo for charitable institution from the point of view of exemption for income tax purposes. From time to time, the law has undergone a change as to what business is permitted and under what circumstances. The present law permits only such business which is incidental to attainment of the objects of the Trust or the institution, subject to the condition that separate account books are maintained for such business as prescribed under sub-section 4A of section 11 of I.T. Act. Requisites of a Trust n n n n n n n The existence of the author/settlor of the Trust or someone at whose instance the Trust comes into existence. Clear intention of the author/settlor to create a Trust. Purpose of the Trust. The Trust property Beneficiaries of the Trust. There must be divesting of the ownership, by the author / settlor of the Trust, in favour of the beneficiary or the Trustee. Unless all these requisites are fulfilled, a Trust cannot be said to have come into existence.

Essentials of a valid Charitable or Religious Trust There are four essential elements of a valid charitable or religious Trust n n n Charitable or Religious Objects: The object or purpose of the Trust must be a valid religious or charitable purpose according to law. Capacity to create a Trust: The founder or settlor should be capable of creating a Trust and dedicating his property to that Trust. Certainty of Object and Dedication: The settlor should indicate precisely the object of the Trust and the property in respect of which it is made. The property should be dedicated to the Trust and the owner must divest himself of the ownership of that property. Concurrence with the law: The Trust or its objects must not be opposed to the provisions of any law for the time being in force.

Instrument of Trust i.e., Trust Deed The instrument by which the Trust is declared is called instrument of Trust, and is generally known as Trust Deed. It is well settled that no formal document is necessary to create a Trust as held in Radha Soami Satsung vs. CIT- (1992) 193 ITR 321 (SC). But for many practical purposes, a written instrument becomes necessary under following cases

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When the Trust is created by a will irrespective of whether the Trust is public or private or it relates to movable or immovable property. This is because as per Indian Succession Act, a will has to be in writing. When the Trust is created in relation to an immovable property of the value of Rs.100 and upwards, in case of a private Trust. In case of public Trusts, a written Trust deed is not mandatory, even in respect of immovable property, but is optional. Where the Trust/association is being formed as a society or company, the instrument of Trust i.e., the memorandum of association, and Rules and Regulations have to be in writing. A written Trust deed is a prima facie evidence of existence of a Trust. A written Trust-deed is always desirable, even if not required statutorily, due to following benefitsn n n n n n n It facilitates devolution of Trust property to the Trust. It clearly specifies the Trust-objectives which enables one to ascertain whether the Trust is charitable or otherwise. It is essential for registration of conveyance of immovable property in name of the Trust. It is essential for obtaining registration under the Income-tax Act and claiming exemption from tax. It helps to control, regulate and manage the working and operations of the Trust. It lays down the procedure for appointment and removal of the Trustee(s), his/their powers, rights and duties. It prescribes the course of action to be followed under any eventuality including dissolution of the Trust.

Types of Instrument of Trust n n n n Trust deed, where a Trust is declared intervivos; i.e., by settling property under Trust. A Will, where a Trust is declared under a Will. A memorandum of association along with rules and regulations, when the association/institution is being formed as a society under the Societies Registration Act, 1860. A memorandum and articles of association where the association /institution is desired to be formed as a Company.

Trust Deed-Clauses A person drafting the deed of a public charitable Trust has to bear in mind several enactments, particularly the Indian Trusts Act; any local enactment relating to Trusts, like the Bombay Public Trusts Act for the State of Maharashtra and the Income Tax Act. Such a person has also to keep in mind the relevant judicial pronouncements dealing with the scope of charitable purpose and accordingly decide whether a particular purpose is charitable or not. An instrument of Trust or association/institution created or established should contain inter alia the following clauses: Nothing contained in this deed shall be deemed to authorise the Trustees to do any act which may in

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any way be construed as statutory modifications thereof and all activities of the Trust shall be carried out with a view to benefit the public at large, without any profit motive and in accordance with the provisions of the Income-Tax Act, 1961 or any statutory modification thereof. The Trust is hereby expressly declared to be a public charitable Trust and all the provisions of this deed are to be construed accordingly. The Trust Deed generally contains the following clauses:

n n n n n n n n n n n n n n n n n n n n n n

Preamble Trust name by which Trust shall be known Place were its office shall be situated Author or settlor of the Trust Names of the Trustees Beneficiaries The property settled, for Trust In case of immovable property, it should contain full description of the property sufficient to identify it An express intention to direct the Trust property from the Trustees The objects of the Trust Minimum and maximum number of Trustees The procedure for appointment, removal, replacement of Trustees Trustees rights, duties and powers Administration of Trust Provision for maintenance of accounts, auditing etc. Clause enabling, spending and utilization of the Trust funds or corpus. Bank Account operations Borrowing money on security for the purpose of the Trust Investment of the Trust funds and dealing with Trust properties Alienation of immovable property of the Trust Amalgamation clause Dissolution of Trust Irrevocable nature of the Trust

Registration of Charitable Trusts Registration of Public Trust (Sec. 18 of Bombay Public Trust Act) It shall be the duty of the Trustee of a public Trust to which this Act has been applied to make an application for the registration of the public Trust. Such application shall be made to the Deputy or Assistant Charity Commissioner of the region or subregion within the limits of which the Trust has an office for the administration of the Trust or the Trust property or substantial portion of the Trust property is situated, as the case may be. Such application shall be in writing, shall be in such form and accompanied by such fee as may be prescribed. The application shall be made within 3 months of creation of the Public Trust. The application shall inter alia contain the full detail as prescribed in the form of Schedule II (under Rule-

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6). Every application made under sub-section (1) shall be signed and verified in the prescribed manner by the Trustee or his agent specially authorised by him in this behalf. A copy of an instrument of Trust shall accompany it, if such instrument has been executed and is in existence. Where on receipt of such application, it is noticed that the application is incomplete in respect of any particulars, or does not disclose full particulars of the Public Trust, the Deputy or Assistant Charity Commissioner may return the application to the Trustee, and direct the Trustee to complete the application in all respects or disclose therein the full particulars of the Trust, and resubmit it within the period specified in such direction; and it shall be the duty of the Trustee to comply with the direction. It shall also be the duty of the Trustee of the Public Trust to send memorandum in the prescribed form containing the particulars, including the name and description of the public Trust, relating to the immovable property of such public Trust, to the Sub-Registrar of the sub-district appointed under the Indian Registration Act, 1908, in which such immoveable property is situated for the purpose of filing in Book No.I under section 89 of that Act. Such memorandum shall be sent within three months from the date of creation of the public Trust and shall be signed and verified in the prescribed manner by the Trustee or his agent specially authorised by him in this behalf. When the Registering Officer is satisfied that the provisions of the Act as applicable to the document presented for registration have been complied with, he shall endorse thereon a certificate containing the word registered, together with the number and page of the book in which the document has been copied. Such certificate shall be signed, sealed and dated by the Registering Officer, and shall then be the conclusive evidence that the Trust has been duly registered. A registered Trust deed shall become operative (retrospectively) from the date of its execution. Procedure for Registration The following documents are required to be filed for registration of a Charitable Trust:

n n n n n

Covering Letter Application Form Schedule II under rule 6 duly notarized Court fee stamp of Rs. 2/- to be affixed on application form Certified copy of the Trust Deed Consent letter of Trustees (Blank Form enclosed)

The office of the Charity Commissioner maintains a register containing all details of the Trust; viz., Reg.No., name and address of the Trust, names of all the Trustees (Past & Present), mode of succession of Trusteeship, objects of the Trust, particulars of documents creating a Trust, description of movable and immovable properties, particulars of encumbrances on Trust property etc. This register is known as P.T.Register. A certified copy of the P.T. Registrar in Schedule-I (vide Rule 5) can be obtained by applying in simple application with Rs.10/- Court fee stamp by paying prescribed fees for the same. It is advisable for all the Trusts to have a certified copy of P.T. Register entry. Registration under the Societies Registration Act Society as a form of charitable institution will be suitable, where a large number of contributors making regular contributions would require some kind of indirect controls by the office bearers. The best examples

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are professional organizations. The Charity Commissioner is also an authority to register such organizations as a society. When a Trust is constituted as a society, it is required to be registered under the Societies Registration Act, 1860. After the Memorandum and Rules and Regulations of the Society have been drafted, signed and witnessed in the prescribed manner, the members should obtain the registration of the society. For the purpose of registration as society, the following documents are required to be filed: Letter requesting for registration stating in the body of the letter various documents annexed to it. The letter is to be signed by all the subscribers to the Memorandum or by a person duly authorised by all of them to sign on their behalf. Memorandum of Association, in duplicate, neatly typed and pages serially numbered. Rules and Regulations in duplicate. Where there is a reference to any particular existing places of worship like temple, mosque, church, etc., sufficient documentary proof establishing legal competence and control of applicant society over such places should be filed. An affidavit of the President or Secretary of the society, on a non-judicial stamp paper of prescribed value, stating the relationship between the subscribers, duly attested by an Oath Commissioner, Notary Public or First Class Magistrate. Documentary proof of address such as House Tax receipt, rent receipt in respect of premises shown as Registered Office of the society or no objection certificate from the landlord of the premises. If the Registrar is satisfied with the documents filed, he then requires the applicant society to deposit the registration fee. Normally, registration fee is Rs. 50, payable in cash or by demand draft. After the registration formalities have been completed and the Registrar is satisfied that the provisions of the Act have been complied with, he issues a certificate of Registration. Certified copies of the Rules and Regulations and Memorandum can be obtained by making simple application. An entity registered under the Societies Act also gets registration under the local Public Trusts Act; i.e., Bombay Public Trusts Act by making an application simultaneously as mentioned above in case of Trust deed. This is so because the definition of a Public Trust in Bombay Public Trusts Act includes a Society which is registered under the Societies Registration Act. Registration under Companies Act A charitable institution/association can be registered as a non-profit company and obtain a license u/s 25 of the Companies Act. For obtaining a license, the association has to first apply for availability of name to the Registrar of Companies of the State in which it wants to get itself registered. The application should be made in Form 1-A and the guidelines issued in this regard should be followed. As soon as the letter of approval of name is received from the Registrar, proceed for incorporation, as follows: n n The institution/associations should apply to the Regional Director, the Registrar of Companies of the region by a letter along with following documents: Three typewritten copies of draft Memorandum and Articles of Association of the proposed company.

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No stamp duty is payable. n n n n n n n n n n n n List of names, addresses, description and occupation of the promoters in triplicate. List of companies, associations and other institutions in which promoters are directors or hold responsible positions, with description of positions held. List of members of the proposed board of Directors. Declaration in the prescribed form by an Advocate, Attorney, Pleader, Chartered Accountant or a whole time practicing Company Secretary, on a non-judicial stamp paper of appropriate value. Copies of accounts, balance sheet and reports on working of association for last two financial years (for one year only if the association has functioned for less than two years), in triplicate. Statement of assets and liabilities. Sources of income and estimate of annual income and expenditure. A note on work already done and proposed to be done by the association. Grounds in brief for making application u/s 25. Declaration signed by each of the applicant. Certified copy of notice published in newspaper. A draft or paid treasury challan for requisite fees for registration.

A copy of the application with all enclosures and accompanying papers should be sent to the Registrar of Companies of the State where the association proposes to situate its Registered Office. After the draft Memorandum and Articles have been approved by the Regional Director, the association should apply to the Registrar of Companies, for its registration as a company, in Form No.1 along with printed copies of Memorandum and Articles and other documents necessary for registration along with a registration fee of Rs. 500/-. The Registrar then issues a certificate of incorporation. Registration under Income-Tax Act Charitable or religious Trusts, societies and companies claiming exemption under sections 11 and 12 of the Income-Tax Act are required to obtain registration under the Act. Private/family Trusts are neither allowed such exemption nor required to seek registration under the Income-Tax Act. The detailed procedure is as under:

n n n n n n n

Registration of Trust under Income-Tax Act procedure for registration u/s 12AA of I.T. Act. Application for registration in Form No.10A in duplicate. List of Name and Address of the Trustees. Copy of Registration Certificate with Charity Commissioner or copy of application to him. Certified True Copy of the Trust Deed. PAN or Copy of application of the Trust. PAN of the Trustees.

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Procedure for registration (Sec 12AA) The Commissioner, on receipt of an application for registration of a Trust or institution made under clause (a) of section 12A, shall Call for such documents or information from the Trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the Trust or institution and may also make such inquiries as he may deem necessary in this behalf. After satisfying himself about the objects of the Trust or institution and the genuineness of its activities, he shall pass an order in writing registering the Trust or institution. If he is not so satisfied, he shall pass an order in writing refusing to register the Trust or institution, a copy of such order shall be sent to the applicant provided that no order under sub-clause (ii) shall be passed un less the applica nt has been given a reasonable op portunity of bei ng heard.

Registration under Foreign Contribution (Regulation) Act, 1976 (FCRA) Any Charitable Trust, Society, Company, desirous of receiving any foreign contribution from a foreign source, is required to obtain registration under section 6(1) of FCRA. Any such association which is not registered or which has been denied registration, can receive foreign contribution only after obtaining prior permission from home ministry of the Central Government under section 6(1A) of the Act. In order to obtain registration under the Foreign Contribution (Regulation) Act, (FCRA), the applicant association should preferably be incorporated as a legal entity, that is, as a Charitable Trust, Society, or a Company (u/s 25) and should have been working for a period of at least three years. The association must not have received any foreign contribution earlier without prior permission of the Government. Application for obtaining permission to accept Foreign Contribution or Hospitality Every individual, association, organization or other person, who is required (under this Act) to obtain the prior permission of the Central Government to accept any foreign contribution, or foreign hospitality, shall before the acceptance of any such contribution or hospitality, make an application for such permission to the Central Government in such form and in such manner as may prescribed. If an application referred to in sub-section (1) is not disposed of within ninety days from the date of receipt of such application, the permission prayed for in such application shall, on the expiry of the said period of ninety days, be deemed to have been granted by the Central Government; provided that, where in relation to an application, the Central Government has informed the applicant the special difficulties by reason of which his application cannot be disposed of within the said period of ninety days, such application shall not, until the expiry of a further period of thirty days, be deemed to have been granted by the Central Government. Application for obtaining prior permission of the Central Government to Receive foreign contribution under sub-section (1) of section 5, or clause (a) of sub-section (2) of that section, shall be made in Form FC-1; Receive foreign contribution under proviso to sub-section (1) of section 6, or under sub-section (1A) of that section or clause (b) of section 10, shall be made in Form FC-1A;

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Accept foreign hospitality under section 9 or clause (d) of section 10, shall be made in Form FC-2. Application for Registration An application for registration of an association referred to in sub-section (1) of section 6 for acceptance of foreign contribution shall be made in Form FC-8. Transfer of Movable Property to Trust A Trust in relation to movable property, can be formed also by mere transfer of ownership of the property to the Trustee, with a direction that the property be held under Trust for the benefit of the beneficiaries. The ownership of a movable property can be transferred by physical act of handing over the possession of the property. The transfer of any symbol of ownership will be deemed sufficient, such as the key of the godown where the property is stored, or the deposit certificate of a Bank wherein the securities are lodged. Where the author himself is the Trustee, transfer of possession is neither necessary nor possible; and a mere declaration of the author that he holds the property under Trust would be sufficient to constitute a Trust. Transfer of Immovable Property to Trust An immovable property can be transferred to the Trust, either by way of settling the property through a Will or Deed or by way of donating the same to the existing Trust. In all the cases, the instrument should be in writing and it should contain complete description of the property so as to clearly identify the property. The title of property should be clear to be transferable to the Trust. It should be free from mortgage and litigation. The instrument by which the immovable property is desired to be introduced to Trust is required to be registered, then only the property can be conveyed in favour of the Trust. An Intimation in the form of change report is required to be sent to the Charity Commissioner so as to record an entry in the P.T. Register. The entry in this record is conclusive evidence that the particular immovable property belongs to the Trust. This record contains description and location of the property and the area of the property. This entry in the P.T. Register is necessary for the reason that if, in future, the said property is desired to be alienated (sold) by the Trust, such an entry is a prerequisite. Private Trust Private Trusts are governed by the Indian Trusts Act, 1882. This Act is applicable to the whole of India except the State of Jammu and Kashmir and the Andaman and Nicobar Islands. Apart from that, applicable to the following:

n n n n

Waqf Property of a Hindu Undivided Family. Public or private religious trustee as charitable endowments. Trusts to distribute prizes taken in war among the captors.

Creation of a Private Trust A Private Trust may be created for any lawful purpose. A private Trust can be created by any person who is of the age of majority and is of sound mind, and is not disqualified by any law. Every person domiciled in India attains majority when he or she completes

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the age of 18years. But in case of a minor, for whom a guardian is appointed by the court or of whose property the superintendence has been assumed by the court of wards, the age of majority is twenty one years. A Trust can be as well created by or on behalf of a minor with the permission of a principal civil court of original jurisdiction. Apart from a human being, a company, firm, society or association of persons is also capable of creating a Trust. Trustee of a Private Trust Any person who is capable of holding property can be appointed a Trustee. A person has capacity to hold property if such a person is capable of administering the property effectively and efficiently with ordinary prudence. Depending upon the nature of the Trust, if Trustee is required to play a passive role without any scope of discretion, a minor may as well be appointed as Trustee. However, where the Trust involves exercise of discretion such as Trust requiring sale of property or its investment, the Trustee should be of the age of majority, of sound mind and should not be disqualified by any law. A Corporation, a company or association of persons may as well be appointed as Trustee. Beneficiary of a Private Trust Every person capable of holding property such as a human being, corporation, Company and even a state can be made beneficiary of a Trust. An unborn person can also be made beneficiary. However, a proposed beneficiary is not bound by the desires of the person creating the Trust. Such a proposed beneficiary can renounce his interest under the Trust by either making a disclaimer addressed to the Trustee or by setting up a claim inconsistent with the Trust. Rights of a Beneficiary Unless the Trust instrument expresses a different intention, a beneficiary has a right to the rents and profits of the Trust property. The beneficiary has the right to ensure that the intention of the author of the Trust is specifically executed to the extent of the beneficiarys interest therein. Accordingly, a beneficiary can compel the Trustee to perform any particular act of his duty or can as well restrain the Trustee from committing any contemplated or probable breach of Trust. If no Trustees are appointed or all the Trustees die, disclaim or are discharged or where for any other reason, the execution of a Trust by the Trustee becomes impracticable, the beneficiary can file a suit for the execution of the Trust. In such a circumstance, the court executes the Trust until a Trustee is appointed for the same. Modes of creating a Private Trust A Trust is created when the person creating the Trust, termed the author of the Trust, indicates with

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reasonable certainty by any words or acts the following:

n n n n

An intention on his part to create Trust The purpose of the Trust The beneficiary The Trust property

Again, unless the Trust is declared by will, or the author of the Trust is himself to be Trustee, the author has to transfer the Trust property to the Trustee. A Trust in relation to immovable property has to be declared in writing signed by the author of the Trust or the Trustee and has to be as well registered; such a Trust may as well be declared by a Will of the author of the Trust or of the Trustee. The Will is not required to be registered. A Trust in relation to movable property can be either declared as in the case of immovable property or by transferring ownership of the property to the Trustee. Trust property The subject matter of the Trust is called Trust property. Any property, which can be transferred to the beneficiary, can be subject matter of the Trust. But a mere beneficial interest under a subsisting Trust cannot be the subject matter of a Trust. Certain other properties also cannot form subject matter of a Trust. Some of these are as follows:

n Chance of receiving property, such as chance of a relation to obtain legacy on death of a n n n n

kinsman or chance of an heir apparent to succeed to an estate. Mere right to sue. Public office or the salary of a public officer whether after or before it has became payable. An interest in property restricted in its enjoyment to the owner personally. Stipends allowed to military, naval, air force and civil pensioners of state or political pensions.

Trustee of a private Trust - Rights and Powers No one is bound to accept a Trust as Trustee. Instead of accepting a Trust, the intended Trustee can within a reasonable period disclaim it. Such a disclaimer prevents vesting of the Trust property in the Trustee. A disclaimer by one of two or more co-Trustees vests the Trust property in other or others, and makes him or them sole Trustee or Trustees from the date of the creation of the Trust. However, a Trustee who has accepted the Trust cannot afterwards renounce it except as under the following:

n With the permission of a principal civil court of original jurisdiction. n Consent of the beneficiary if he is of the age of majority, and of sound mind and not disqualified
by any law.

n By special power in the instrument of the Trust.

Equally a Trustee cannot generally delegate his duties either to a co-Trustee or a stranger. A delegation of duties can be made only if:

n Instrument of Trust provides for it. n Delegation is in the regular course of business.

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n The delegation is necessary. n The beneficiary, being a major of sound mind, consents to the delegation.
Administration of Trust property by the Trustee The Trustee is required to fulfill the purpose of the Trust and to obey the directions of the author of the Trust unless they have been duly modified by the consent of all the beneficiaries. In order to do so, the Trustee has to acquaint himself as soon as possible, with the nature and circumstances of the Trust property and where necessary, he is also required to transfer the Trust property to himself. He may also reclaim the Trust money, invested on insufficient or hazardous security. A Trustee has to protect the Trust property. In the absence of a contract, a Trustee is not liable for the loss, destruction or deterioration of the Trust property if in the exercise of his duties, he has extended due care as a man of ordinary prudence. A Trustee is required to keep clear and accurate accounts of the Trust property and is also bound to furnish the beneficiaries, at their request, full and accurate information as to amount and state of the Trust property. Where the Trust property consists of money and cannot be applied immediately or at an early date to the purpose of the Trust, the Trustee is bound to invest the money on certain government securities prescribed by the Indian Trusts Act. A Trustee can apply to the court for its opinion, advice, or direction on issues regarding the management of the Trust property if such issues can be adjudicated by the court in a short hearing. Extinction & revocation of Trusts A Trust gets extinguished under four circumstances :(1) when its purpose is completely fulfilled (2) when its purpose becomes unlawful (3) when the fulfillment of its purpose becomes impossible by destruction of the Trust property or otherwise (4) when the Trust, being revocable, is expressly revoked. Revocation of a private Trust The Trust created by a Will can be revoked at the pleasure of the testator that is, author of the Trust who has by his Will envisaged the Trust. A Trust created otherwise can be revoked only in following 2 circumstances:

n By the consent of all the beneficiaries if they are of the age of majority, of sound mind and are as n By exercising power of revocation if it is expressly reserved for the author of the Trust. n At the pleasure of the author of the Trust; if the Trust is for the payment of the debts of the
author of the Trust and it has not been communicated to the creditors. But no Trust can be revoked by the author of the Trust so as to defeat or prejudice the acts duly done by the Trustees in the execution of Trust. Trust & Probate The Trust is often marketed as a vehicle that allows you to avoid Probate upon your death. Probate is the court-supervised process of transferring property at death pursuant to the terms of a will. Many types of property routinely pass outside of the Probate process. These include: well not disqualified by any law

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n life insurance or retirement plan proceeds which pass to a named beneficiary rather than your n real estate or bank or brokerage accounts held in joint names with right of survivorship
While it is true that the property passing under the terms of a Trust upon the death of the maker of the Trust will avoid Probate, it should be noted that there may or may not be actual value in that result. In some states, there are statutorily mandated court or attorney fees while in others, those fees may be minimal. A properly drafted will in many states can eliminate some of the steps otherwise required in the Probate proceedings. In addition, much of the delay and red tape customarily associated with Probate is a result of the tax laws and tax filing requirements, which cannot be eliminated through a Trust and the avoidance of Probate. A Trust can almost never totally avoid Probate and a simple will is needed to pour over to the Trust any property that has not been transferred to the Trust during life. Property that passes at death through a revocable Trust must first be transferred to the Trust, administered by a Trustee who may or may not charge fees, and then transferred out of the Trust to the beneficiary. These costs and the costs associated with tax filings are often ignored by Trust marketers. There may be other costs as well depending upon the jurisdiction, such as real estate transfer taxes. The comparison of cost between Probate and a Trust should be made on a case-by-case basis. Wakf As per Islamic law, Trust is called as Wakf. Wakf signifies the appropriation of a particular article in such a manner as subjects it to the rules of divine property, where the appropriators right in it is extinguished, and it becomes a property of God, by the advantage of it resulting to his creatures. The word Wakf, as per Islamic law, has two meanings: estate

n Inalienable lands belonging to the Government, which are charitable. n Pious endowments with reference to the subject matter of Trusts; the second meaning being
relevant.

Essentials of Wakf Wakf has to be a permanent endowment in perpetuity. It cannot be either contingent or revocable. No instrument in writing is required to create a Wakf. An oral dedication can as well create a Wakf. Neither delivery of possession nor appointment of Mutawallis (administrator of Wakf) is required. But the subject of Wakf must be clearly defined. A Wakf can also be made by a will or by long user. Any Muslim who has attend majority and is of sound mind can make a Wakf. A minor or his guardian, as on behalf of the minor, cannot make a Wakf. Again, a Wakf cannot be made for an illegal object.

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A Wakfnama by which immovable property of value of Rs.100 or more is dedicated by way of Wakf requires registration. The property which is either capable of being used without being consumed or which is thought consumable in itself but is capable of being converted into property of a permanent, nature can form the subject matter of a Wakf. Wakf may be divided into two classes- 1.Public and 2. Private. A Public Wakf can be created for any purpose, which is considered religious, pious, or charitable by the Mohammedan law. Any Wakf created with the object of obtaining the approval of the almighty or a reward in the next world is pious as per Mohammedan law. Few instances of a pious or a religious purpose may be mosques, provisions for imams, colleges, bridges, assistance to poor people to perform pilgrimage to Mecca, and distribution of alms to the poor. A private Wakf is for the benefit of settlors family and his descendants and is regulated under the administration powers of a Mutawalli so as to ensure transparency and proper execution of a Wakf. For instance, the Wakf Act, 1954 makes registration of a Wakf, whether created before or after the commencement of the Act, at the office of a Wakf commissioner mandatory. Thereafter, the Mutawalli of these registered Wakfs are required to prepare budget and accounts of the Wakf for the appraisal of the Wakf commissioner and the Wakf board. In certain cases, the Wakf board can assume direct Management of the Wakf. The income of the Wakf is assessable in the hands of the Mutawalli. The Mutawalli is treated in express terms, as a Trustee, though he is not one in the technical sense under the Mohammedan law. The characteristics of a Wakf are as follows: They are called Wakf-alal-aulad. The private wakf are governed by the Mussalman Wakf Validating Act, 1913, which allows a Mohammedan to create a Wakf for the maintenance of himself and of his family or children or descendants provided that the ultimate benefit is reserved for the poor or for any other purpose recognized by the Mohammedan law as a religious, pious or charitable purpose of permanent character. Wakf may be made for the rich as well poor people alike or for the affluent and thereafter for the poor or for the poor people alone. All persons, regardless of their financial status, can be made beneficiaries of a Wakf. Even family members and descendents of the Wakif, that is the person creating the Wakf, can be made beneficiaries. Under Hanafi law, the Wakif himself can also be a beneficiary. As soon as someone makes his property Wakf for the purpose of building a mosque, he ceases to be its owner. However, while effecting a Wakf one can appoint himself, or any person of his choice, as administrator of that Wakf who takes care of its management and carries out its day-to-day affairs according to Shariah and conforming to the conditions of the Waqf. This administrator is called Mutawalli. Under Muslim law, the administration of a Wakf is vested in the Mutawalli but since 1923, a number of Central and State Acts have restricted. There is another interesting piece of truth which is the legacy left behind one of the greatest empires in the world- that of the Delhi Sultanate. It is the legacy that the great last Mughal Emperor left behind since kingship was abolished by the then free government of India. It is the story of middle-aged Sultana Begum. She runs a tea-stall in Howrah to earn a living for her family. Twenty-five years ago her

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husband Mirza Bedar Bakht, the great grandson of last Mughal Emperor Bahadur Shah Zafar, died in penury. Bedar Bakht sharpened knives to eke out living. After his death, the West Bengal government was approached by several organisations to provide an accomodation for the family. Sultana Begum ultimately got an accomodation but it was near the Red Light District. The goons occupied the house. She continued to live in the slum. The anti-social elements preyed upon her daughters and she ran hither and thither to get protection for her daughters. Eminent writer Firoz Bakht Ahmad recounts that when he visited the house he stunned at the condition the family was living in. There was absolutely nothing in the room in the name of household goods. The pension ended with her husbands death long ago. This story brings out the fact that one never knows when the good times end and which devil of death and misfortune is waiting around the corner!

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Chapter 6

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Power of Attorney
Introduction

Power of Attorney is a formal arrangement by which one person gives another person authorityto act on his behalf and in his name. The person who gives Power of Attorney is refered to as the donor and the person who acts on the behalf of donor is refered to as the attorney. A Power of Attorney is an instrument in writing whereby one person, as principal, appoints another as his agent and confers authority to perform certain specified acts or kinds of act on behalf of principal. A Power of Attorney includes any instrument empowering a specified person to act for and in the name of the person executing it. A Power of Attorney may be a general power or a special power. What one has to look at before one decides whether a power is general or special is what is the subject matter in respect of which this power is conferred; if the Court comes to the conclusion that the subject matter is not general, that it is restricted to something specific, something particular, then the Power of Attorney would not be a general Power of Attorney. Power of Attorney & Estate planning Example What happens if Hari loses the ability to manage his affairs and make important decisions? Who will take charge? Although his assets will be protected, there will be a cost associated with dealing with the legal issues. In addition, as the legal issues are resolved, important financial decisions may not be made on a timely basis. By drafting a Power of Attorney, he will be able to choose the person who is best qualified to manage his affairs when he becomes mentally incapacitated. A Power of Attorney gives written authority to this person to deal with estate on Haris behalf If Hari doesnt give a Power of Attorney, laws will govern who is responsible for managing his affairs. Although interested parties can generally apply to the courts to be granted the right to conduct Haris affairs, this can be a timeconsuming and expensive process. The family members cannot act on Haris behalf on short notice. Even a couple can make separate Powers of Attorney and appoint each other for managing their business and any other deal in the absence, death or incapacity of either one of them. Types of Power of Attorney

n General Power of Attorney: A Power of Attorney may be a general power or a special power. A
General Power of Attorney is a document by which one person appoints another person to represent him/her and act on behalf of himself to manage, attend or carry out certain works like management, sale of property and dealings in the court, etc.

n Special Power of Attorney: A power of attorney conferring on the agent or attorney the authority
to act in a single or specified transaction in the name of principal or donor is known as special Power of Attorney. E.g. Special Power of Attorney for a particular court case.

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Risks Associated with Power of Attorney The risks of appointing an agent are small. The most important way to reduce any risk is to carefully choose an agent. Select someone whom the client trusts completely. The Power of Attorney does not mean that the agent owns any of clients property. It allows the agent to make financial decisions when the client cant. The client can withdraw a Power of Attorney whenever he wants as long as the client is competent. Appointing someone as agent doesnt mean that the client gives up the right to manage his own affairs. Responsibility An individual can select the responsibilities, or powers, he wants his agent to have. He can authorise his agent to do one thing, such as sell his car. Or he can give his agent the authority to do any legal act he could do himself. He can give a wide range of powers, such as having access to bank accounts, selling stocks, and managing real estate. He may want his agent to sign his income tax return, apply for benefits, and make gifts. He should design his Power of Attorney to fit his anticipated needs and even when he gets incapacitated, he can authorise the agent to alter his will on his behalf. Some examples of legal powers contained in the Power of Attorney are the following: (they are only inclusive, not exhaustive)

Real estate: To execute all contracts, deeds, bonds, mortgages, notes, checks, drafts, money orders. To lease, collect rents, grant, bargain, sell, or borrow and mortgage. To manage, compromise, settle, and adjust all matters pertaining to real estate.

Contracts, agreements To enter into contracts. To make, sign, execute, and deliver, acknowledge any contract, agreement. Perform any contract, agreement, writing, or thing.

Stocks, bonds, and securities To sell any and all shares of stocks, bonds, or other securities. To make, execute, and deliver any assignment, or assignments, of any such shares of stock, bonds, or other securities.

Bank accounts, certificates of deposit, money market accounts To add to or withdraw any amounts from any of the clients bank accounts, Certificates of Deposit, Money Market Accounts, etc. To make, execute, endorse, accept and deliver any and all cheques and drafts.

n Deposit and withdraw funds.

To acquire and redeem certificates of deposit, in banks, savings and loan. To execute or release such deeds of Trust or other security agreements as may be necessary.

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Tax returns, insurance and other documents

To file, sign all tax returns, insurance forms and any other documents. To represent in all matters concerning the foregoing. What Type of Power of Attorney is best? The best way to draft a Power of Attorney is to state the broadest range of powers you feel comfortable giving to your agent. This will allow your agent to take care of all matters, even those you cannot foresee now. Creation of the Power Who can give a Power of Attorney? (A) Individual Any person who is competent to appoint an agent can appoint an attorney. Any person: n Who is of the age of majority according to the law to which he is subject n Who is of sound mind, may employ an agent. It therefore follows that any person who is of the age of majority and who is of sound mind can give a Power of Attorney. n Married women can execute powers of attorneys even if they are minors (B) Partnership firms A partner in a partnership is an agent of the firm, but he cannot bind the firm as regulated by the partnership Act. In the absence of any usage or custom trade to the contrary, the implied authority of a partner does not extend to: Submit a dispute relating to business of the firm to arbitration; Open a banking account on behalf of the firm in his own name; Compromise or relinquish any claim or portion of a claim by the firm; Withdraw a suit or proceeding filed on behalf of the firm; Admit any liability in a suit or proceeding against the firm; Acquire immovable property on behalf of the firm; Transfer immovable property belonging to the firm; or Enter into partnership on behalf of the firm. From the above, it follows that in case the firm intends to confer any of these powers to a partner, though there is no usage or custom of trade to the contrary, he would need a Power of Attorney from all the partners of the firm in his favour, specifying the authority conferred. It is therefore desirable to insist in all cases where a Power of Attorney is being given by a partnership firm that all partners constituting the firm should sign the Power of Attorney. (C) Companies Section 48 of the Companies Act, 1956 provides that a company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney to execute deeds on its behalf in any place either in or outside India. A deed signed by such an attorney on behalf

n n n n n n n n

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of the company and under his seal, where sealing is required, shall bind the company and shall have the same effect as if it were under its common seal. In all cases, the important point to be noted is that authorization by a Resolution of the Board is necessary for affixing the seal to any instrument. Where there is no such authorization, the affixing of the seal will not bind the company. One must therefore ensure that in cases where a Power of Attorney is given by a company to any person, the power is given pursuant to a resolution passed by the Board of Directors of the company and is given under its common seal. Who can be appointed as an attorney? As between the principal (donor) and third persons, any person may become an agent (attorney), but no person who is not of the age of majority and of sound mind can become an agent (attorney), so as to be responsible to his principal (donor). A person who has no capacity, or only a limited capacity, to contract on his own behalf, is competent to contract so as to bind his principal. But, such a person is not responsible to his principal for the acts done by him for and on behalf of his principal. Authentication Under Section 85 of [The Indian] Evidence Act, 1872, there is a presumption that every document purporting to be a Power of Attorney, and to have been executed before and authenticated by, a Notary Public or any Court, Judge, Magistrate, Consul, or Vice-Consul or representative of the Central Government was so executed and authenticated. The authentication is not merely attestation, but something more. It means that the person authenticating has assured himself of the identity of the person who has signed the instrument as well as the fact of execution. It is for this reason that a Power of Attorney bearing the authentication of a Notary Public or an authority mentioned in Section 85 of [The Indian] Evidence Act, 1872 is taken as sufficient evidence of the execution of the instrument by the person who appears to be the executant on the face of it. Duration A general Power of Attorney, unless expressly or impliedly limited for a particular period, continues in force until revoked or determined by the death of either party. A special Power of Attorney to do a certain act or acts is determined when the act or acts is or are completed. If it is desired that the power should continue for a particular period or until a certain event happens, an expressed provision to that effect should be made. A Power of Attorney appointing attorneys without in terms limiting the duration of their power but with a recital that the principal was going abroad and was desirous of appointing attorney during his absence, was held to be an appointment limited to the time during which the principal was abroad. Where the principal just before leaving India executed a Power of Attorney authorizing the agent to act in his absence from India and subsequently came to India and again left it but did not execute a new power before so leaving, held that the power of the agent did not terminate then the agent had power to act for the principal during his absence.

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Revocation Power of Attorney can be revoked or would stand revoked if:

n n n n n

Revoked by the principal himself The principal dies or becomes insane or becomes bankrupt The business for which the agent was appointed is over Mutually agreed upon by the principal and agent The right under the Power of Attorney is renounced by the agent

Registration Registration of Power of Attorney is not compulsory, it is optional. In India, where the Registration Act, 1908 is in force, the Power of Attorney should be authenticated by a Sub Registrar only (whenever a person signs the document and his attorney presents/ admits execution). In other areas, attestation should be by a Notary or diplomatic agents. In case an attorney under a valid Power of Attorney himself signs a document, he may, as an executing (signing) party present/admit execution of a document though it is attested by a Notary, unless the text of the power specifically excludes such powers. Foreign Power of Attorney should be got stamped by the Collector after its receipt in India within prescribed time of 3 months. Registration of Power of Attorney authenticates the deed of Power of Attorney Power of Attorney shall be attested by two or more adult independent witnesses who are of sound mind. If a Power of Attorney is in respect of an immovable property of value more than Rs100, it must be registered. Stamp Duty Power of Attorney is chargeable to stamp duty under Article 48 of Schedule 1 to the Indian Stamp Act, subject to state intervention if any. Points to remember The general rule of Power of Attorney is that it should be strictly construed unless an express power is conferred on an agent to enter into contracts of guarantees on behalf of his principal or to execute or negotiate, negotiable instruments for his principal jointly with others. An agent cannot, by his acts, bind the principal to a larger extent than he is empowered to do under the Power of Attorney. Fraud by the power agent does not bind the principal. He cannot be sued or otherwise held responsible for fraud by the agent. If the power does not authorise the agent to carry on a business except with limitations, any act done by him in excess of such power will not bind the principal. For example, power to dispose of property does not confer a power to mortgage the property.

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Power to manage immoveable property cannot permit principals ornaments which are a moveable property.

Model forms GENERAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that, I, RP s/o late GR, r/o ., do hereby appoint Mr. PK, Advocate, s/o Late SN r/o .. as my attorney and authorise them to do all or any of the thing jointly or severally on my behalf. That the said attorney shall demand, collect and receive in my name and on my behalf all debt, advances, loans advantages and other claims due to me . They are further empowered to take all lawful proceedings and means to recover and receive the said loans advances and debts etc. They are empowered to prosecute and defend to lawful action suits and claims and refer the matter to arbitrators, file the suit, compromise the suit and execute such instruments as they think proper and necessary. The said attorneys are empowered to borrow such loans and advances as they think proper in my interest and furnish security of movable and immovable property on such terms and conditions as they think proper.The said attorneys are empowered to sell, exchange, surrender, transfer, lease or depose of any houses and buildings, lands, etc, which belong to me in such manner as they think proper and expedient. The said attorneys are empowered to invest my monies as they think proper and expedient. The said attorneys are empowered jointly and severally to deposit the money they collect on my behalf in my bank account. The said attorneys are authorised to draw, accept, endorse, negotiate, retire, and pay any bills of exchange, promissory note cheques, and other negotiable instruments, as they think proper and expedient in my interest. The said attorneys are authorised to operate my bank account, close the bank account, open bank account in some other bank as they think proper and expedient in my interest. The said attorneys are authorised to let out or to give on lease my properties to the persons they think proper, recover rent, already due, and recover the rent as may be due in future from time to time. They are further authorised to sue the persons for recovery of rent, to compromise or sue and do all other works concerned with it. The said attorneys are authorised to take the property on lease and execute lease deed for and on my behalf as my attorneys. They are authorised to call upon shares belonging to me and attend the meetings of any company of which I am the shareholder. The said attorneys are authorised to appoint, or remove the agents, to look after my estate and fix the salaries etc. of the agent on my behalf. The said attorneys are authorised to do generally all such things and acts as my attorneys or attorney, which shall be binding on me.

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IN WITNESS WHEREOF I have signed this deed of Power of Attorney in the presence of the following witnesses : Witnesses : 1 2 SPECIAL POWER OF ATTORNEY FOR A COURT CASE BY THIS POWER OF ATTORNEY I, ................. son of .................... residing at ....................................... plaintiff in civil suit No. .................. of ............................... hereinafter referred to as the said suit, pending in the court of the .......... hereby nominate, constitute and appoint Shri .................. son of Shri .................. resident of ................... as my attorney for me, in my name and on my behalf to do or execute all or any of the following acts or things in connection with the said suit: 1.To represent me before the said court or in any other, where the said suit is transferred in connection with the said suit. 2.To engage or appoint any solicitor, counsel, advocate, pleader or lawyer to conduct the said suit. 3.To prosecute the said suit and proceedings, to sign and verify all plaints, pleadings, applications, petitions or documents before the court and to deposit, withdraw and receive document and any money or moneys from the court or from the defendant either in execution of the decree or otherwise and sign and deliver proper receipts for me and discharges for the same. 4.To apply for inspection and inspect documents and records, to obtain copies of documents and papers. 5.To compromise the suit in such manner as the said attorney shall think fit. 6.To do generally all other acts and things for the conduct of the said suit as I could have done, if I was personally present. And I hereby for myself, my heirs, executors, administrators and legal representatives, ratify and confirm and agree to ratify and confirm whatsoever our said attorney shall do or purport to do by virtue of these presents. IN WITNESS WHEREOF, I the said .............. has hereunto set and subscribed my hand this ................ day of ................... 2000. Signed and delivered by the within named WITNESSES; 1. 2. Identified by me Advocate Signature.

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Chapter 7

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Gifts

Gift is a relinquishment without consideration of ones own right in property and the creation of the right of another or it is a 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 the behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donor dies before acceptance, the gift is void. A gift of immovable property to minors is complete when it is accepted by a person, on behalf of the minors, who appends his thumb impression on the gift deed in token of acceptance. Further, possession and use of gifted property by the donee would establish acceptance of gift. Essential Elements of Gifts

n The essence of a gift is that it is a gratuitous transfer or it is a transfer without accepting any thing
in return.

n The Donor The donor is the person who gives the gift. Any person who is competent to
contract can make a gift of his property. A minor incompetent to contract is incompetent to transfer. The Donee Donee is a person who acquires any property under a gift, and, where a gift is made to a Trustee for the benefit of another person, includes both the Trustee and the beneficiary. The subject matter of gift: The subject matter of gift must be certain existing movable or immovable property. It may be land, goods or actionable claims. Transfer of property: The transfer of the subject matter of gift by the donor to the donee. Voluntary: The term voluntary clearly means without duress, force or undue influence. So, gift by donor to donee should be a voluntarily act. It should not be made out of any force and compulsion.

n n n n

How are Gifts made? The transfer of Property Act provides the modes of transfer by way of a gift.

n Accordingly, for the purpose of making a gift of immovable property, the transfer must be
affected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. n For the purpose of making a gift of movable property, the transfer may be affected by a registered instrument signed as aforesaid or by delivery. Such delivery may be made in the same way as goods sold or may be delivered. n Gift can also be made by book entries. A gift cannot be said to have been made merely because an owner of business makes entries in his book of accounts without an allocation of funds corresponding to such entries. n Admission of minor to benefits of partnership: By admission of the minors to the benefits of partnership, if there is reduction in the shares of the partners, there is a gift to the extent of reduction.

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What property may be gifted? A Hindu may dispose of by gift his separate or self acquired property, subject in certain cases to the claims for maintenance of those he is legally bound to maintain. A coparcener, may dispose of his coparcenary interest by gift subject to the claims of those who are entitled to be maintained by him. A father may by gift dispose of the whole of his property, whether ancestral or self acquired, subject to the claims of those he is entitled to be maintained by him. A female may dispose of her Stridhana by gift or will, subject in certain cases to the consent of her husband. A widow may in certain cases by gift dispose of a small portion of the property inherited by her from her husband, but she cannot do so by Will. The owner of an impartible estate may dispose of the estate by gift or Will, unless there is a special custom prohibiting alienation or the tenure is of such a nature that it cannot be alienated. A gift under Hindu law need not be in writing. However, a gift under the law is not valid unless it is accompanied by delivery of possession of the subject of the gift from the donor to the donee. However, where physical possession cannot be delivered, it is enough to validate a gift, if the donor has done all that he could do to complete the gift, so as to entitle the donee to obtain possession.

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Chapter 8

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Partition
Introduction

artition is the process by which property held in undivided shares by joint tenants, tenants in common or coparceners is divided amongst them. It is a mode of putting an end to joint ownership. A separation ordinarily precedes the distribution of what was formerly joint property. Partition of HUF (Hindu Undivided Family): Where the property admits of a physical division of the property, but the physical division of the income without a physical division of the property producing the income shall not be deemed to be partition. Partition of HUF and advantages from point of view of tax incidence:

n No capital gains: A partition does not involve transfer in law; hence distribution of assets by
HUF on partition would not attract liability to tax on capital gains, whether partition is total or partial. n No withdrawal of development rebate or investment allowance: Any development rebate/ investment allowance to the HUF cannot be withdrawn on its partition. n No gift tax: No liability to gift tax would arise. Helping tools: Transfer of Property What is the law that governs transfer of immovable property? Is the Transfer of Property Act, an old enactment still in force? Is real estate a transfer of property? Is purchasing an immovable property the same as buying a movable property such as consumer goods? While purchasing movable properties, the consumers generally go by the brand, and are satisfied with the warranty given for a specific period by the seller. For movable properties, the Sale of Goods Act applies. Further, we have enactments, such as the Consumer Protection Act and MRTP Act, to safeguard the interest of the consumers. For instance, if a refrigerator you purchased does not work properly, you can ask the dealer to repair or replace it. Also, if the dealer does not comply with the genuine request, you can make a complaint before the appropriate consumer forum for relief. And after hearing both parties, if your case is proved, the forum will pass an order directing the dealer to rectify the mistake or replace the equipment, and also award compensation for the loss and mental agony that you sustained.

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Are there similar provisions in the Transfer of Property Act? What are the precautions to be taken while purchasing house property/lands/flats/etc.? One has to look into a number of points before venturing to purchase any immovable property. First, the title of the vendor to the property must be scrutinized. This can be done with the assistance of a competent lawyer who will peruse all the original documents of title. Care should also be taken to find out whether the original documents have been pledged with any person or bank as collateral for a loan. In such contingencies, the purchaser should call upon the seller to arrange for inspection of the original documents at the place of the creditor, or wherever the documents are in custody. The vendors right to sell the property should be examined in the light of a number of enactments, such as the Succession Act, Land Ceiling Act and the Land Acquisition Act. If the lawyer is satisfied, then the parties can enter into an agreement of sale. Further, the identity of the vendor should be established. Now it is mandatory for the vendor and the purchaser to give the PAN number allotted to them by the Income-Tax Department in the sale deed. If the parties to the document have not been allotted any PAN number, they should give a declaration in writing to the Sub-Registrar. Any false declaration will entail criminal prosecution. The vendor, if not available, can contract to sell by virtue of a Power of Attorney executed in favour of his agent. This power deed may be registered or unregistered, as the registration of Power of Attorney is optional. The purchaser should be satisfied that the power referred to by the agent is still in force, and subsisting on the principal. The power deed has no validity if the principal is not alive at the time of contract of sale, or at the time of the sale transaction, if no contract has been entered into. The property should be free from all encumbrances and charges.

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Chapter 9

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Transfer of Property

T
n n n n

ransfer of Property means an act by which a living person conveys property, in present or future, to one or more living persons, or to himself or to himself and one or more other living persons. Living person includes a company or association or body of individuals, whether incorporated or not. The property may be movable or immovable, present or future. Such transfer can be made orally, unless transfer in writing is specifically required under any law. Any person competent to contract and entitled to transferable property, or authorised to dispose transferable property on his own, is competent to transfer such property. The property can be transferred wholly or in part. It can be transferred either absolutely or conditionally. Such transfer can be only to the extent and in manner allowed and prescribed by law. The property can be generally categorized as: Immovable and movable Freehold and leasehold Agricultural and Non Agricultural property Commercial and Residential property

Immovable Property: It includes things attached to earth. In accordance with the Transfer of property Act, immovable property means things attached to earth, to wit, rooted in the earth, as in case of trees and shrubs imbedded in the earth, as in the case of walls or buildings; or attached to what is imbedded for the permanent beneficial enjoyment of that to which it attached. Leasehold Property: When a piece of property is given or leased to an individual (known as the Lessee) for a stipulated period of time by the owner of the property (known as the Lessor), the property is referred to as Leasehold Property. A certain amount is fixed by the Lessor to be paid as lease premium and annual lease. The land ownership rights remain with the Lessor. Transfer of property requires prior permission. Freehold Property: When ownership rights for a piece of property are given to the purchaser for a price, that property is referred to as Freehold Property. Unlike in the case of leasehold property, no annual lease charges need to be paid and the freehold property can be registered and / or transferred in part(s). Ways of Transferring Property 1) Sale: A Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and partpromised. How is a Sale made? Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be

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made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale: A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property. 2) A Mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed. 3) A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined :The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. 4) Exchange: When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange. A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale. 5) Gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void. Transfer of Actionable Claim The transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent; shall be complete and effectual upon the execution of such instruments, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not: PROVIDED that every dealing with the debtor or other actionable claim by the debtor or other person from or against whom the transferor would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer.

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Example A owes money to B, who transfers the debt to C. B then demands the debt from A, who, not having received notice of the transfer, as prescribed in section 131, pays B. The payment is valid, and C cannot sue A for the debt.

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Chapter 10

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Mortgage

mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan, an existing or future debt or the performance of an engagement, which may rise to a pecuniary liability. Thus, a mortgage is a transfer of an interest in specific immovable property as security for the repayment of the debt. In order to create a mortgage, it is necessary to specify the immovable property. The description must at least be sufficient to identify the property. The transferor is called mortgagor, the transferee a mortgagee; the principal money and interests of which payment is secured for the time being are called the mortgage-money, and the instrument by which the transfer is effected is called a mortgage deed. Classes of Mortgages English Mortgage In very simple words, mortgage is a transaction where a mortgagor takes a loan from a mortgagee, against a security. Thus, we can say that a mortgage is a transfer by way of security. Unlike other transfers, such as sale, lease, exchange or gift, a mortgage has no independent existence of its own. There can be no mortgage without a debt. The security provided is an immovable property. A property can be mortgaged in any of the following ways: 1. Simple Mortgage: When the possession of the mortgaged property is not transferred from mortgagor to the mortgagee. If the mortgagor fails to repay the loan, the mortgagee has the right to sell the property and recover the loan from the sale amount. Conditional Sale: Here the mortgagor apparently sells the property to the mortgagee subject to certain condition. The condition may be either of the following: a. On failure to repay the mortgage money before a certain date, the sale shall become absolute, b. On such repayment of mortgage money, the sale shall become invalid, or c. On such repayment, the mortgagee shall retransfer the property. Usufructuary Mortgage: In this type of mortgage, the possession of the mortgaged property is transferred to the mortgagee. He receives the income from the property, e.g. rent, profit etc, until the repayment of the loan. The title deeds remain with the owner. Mortgage by Deposit of Title Deeds: Here, the mortgagor delivers the title document of the property to the mortgagee with an intention to create a security thereon. This mortgage can be entered into only in the towns of Chennai, Kolkota, Mumbai or any other town, as notified by the State Government in the official gazette. English Mortgage: In an English Mortgage: a. The mortgagor transfers the property absolutely to the mortgagee. b. The mortgagor binds himself to repay the borrowed money before a certain date. c. Such transfer is subject to the condition that the mortgagee will retransfer the property on repayment before the agreed date.

2.

3.

4.

5.

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Who can Mortgage? Any person living who is not under any disability, a company or an association or body of individuals, who has interest in an immovable property, can mortgage that interests. Who can be a Mortgagee? Any person capable of holding property can take a mortgage. A minor may be a mortgagee but the mortgage should not involve any covenants by him because he is not competent to enter into any contract. SAMPLE MORTGAGE DEED This Deed of Mortgage made at ................. (Give place) this.................... (Give date) Day of...................... (Give month) 200... between X, son of.............................. resident of.......................(Give details) hereinafter called as a mortgagor of the ONE PART and Y, son of........................ resident of ..................... (Give details) hereinafter called as a mortgagee of the OTHER PART. WHEREAS the mortgagor has absolutely seized and possessed the house bearing no. .................. situated at.................... (Give address) more particularly described in the schedule hereunder written AND WHEREAS the mortgagor has requested the mortgagee to lend him a sum of Rs............... (Give amount) which the mortgagee has agreed on the mortgagor mortgaging his property. NOW THIS DEED WITNESSETH THAT in pursuance to the said agreement and in consideration of the sum of Rs.............. (Give amount) at or before the execution of these presents paid by the mortgagee to the mortgagor (the receipt whereof, the mortgagor hereby admits and acknowledges), the mortgagor hereby covenants with the mortgagee that he will pay on the................... (Give date) Day of.........................(Give month) (hereinafter called the said date), the said sum of Rs....................(Give amount) with interest @.......... % per annum from the date of these presents till the repayment of the said sum in full every quarter. The first installment of interest to be paid on the..................... day of.............200........... and each subsequent installment on the............... day of July, October, January and April of each succeeding year until the said sum is repaid in full. (Clarify payment terms) AND THIS DEED FURTHER WITNESSETH THAT In consideration aforesaid, the mortgagor hereby transfers by way of mortgage his house bearing no ................. (Give no.) situated at ................ (Give address) as a security for repayment of the said sum with interest @................... Per annum with the condition that the mortgagor, his heirs, executors, administrators or assigns shall on the said date pay to the mortgagee, his heirs, executors, administrators or assigns the said sum of Rs together with interest thereon at the rate mentioned above. AND IT IS HEREBY AGREED AND DECLARED that if the mortgagor does not pay the said mortgage amount with interest, the mortgagee shall be entitled to sell the said house through any competent court and to realise and receive the said mortgage amount and interest, out of the sale proceeds of the house. AND IT IS FURTHER AGREED AND DECLARED by the mortgagor that during the period, the mortgage amount is not paid and the said house remains as a security for the mortgage amount, the mortgagor

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shall insure the said house and take out an insurance policy in the joint names of the mortgagor and mortgagee and continue the said policy in full force and effect by paying premium and in case of default by the mortgagor to insure or to keep the insurance policy in full force and effect, the mortgagee can insure the said house and the premium paid by the mortgagee will be added to the mortgage amount, if not paid by the mortgagor on demand. AND IT IS FURTHER AGREED THAT the mortgagor can grant lease of the said house with the consent of the mortgagee in writing. AND THE MORTGAGOR FURTHER AGREES that he shall bear stamp duty, registration charges and other out of pocket expenses for the execution and registration of this deed and reconveyance deed. IN WITNESS WHEREOF the parties have signed this deed based on the Schedule above referred to. WITNESSES: 1. Signed by X the within named mortgagor 2. Signed by Y the within named mortgagee

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Chapter 11

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Mutation

utation is a process whereby a property is transferred from one persons to another persons name or it is a process where a name is substituted in the records showing the right or the title to the property. When the property is acquired by a person who after that acquisition becomes the rightful owner of the property, then all the titles of the property should be transferred in his name. In the records of the revenue department for the purposes of collecting taxes, the need to change the name of the owner is paramount. Property, needs to be shown in records maintained by a society so that there is no conflict with regard to who should be the rightful holder of the title with regard to a certain property. The mutation is carried out in accordance with State specified rules and the records are maintained thereafter. The form and the process by which the propertys title can be mutated, can be obtained from the Land of development authority of the state or the Central government. Mutation entries in the revenue records are only for the purposes of collection of revenue from the person who is in possession of the property and not for the purpose to announce the title of the owner.

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Questions

Estate Planning
Q1. Why people do Estate Planning? A. B. C. D. Q2. To distribute assets among beneficiaries To meet lifes goals like buying house To plan about which property will give maximum benefits None of the above

What does Estate Planning include? A. B. C. D. Total property Cash Real Estate Personal property

Power of Attorney
Q1. What are the parties to Power of Attorney called? A. B. C. D. Q2. Donor & donee Debtor & receiver Client & attorney Principal & client

What is Power of Attorney? A. B. C. D. It is an authority given on behalf of one person to another to act on behalf of other person It is an authority given by one person to another to do any lawful act on behalf of the other It is an authority given by one person to another to do any act related to law affairs None of them

Q3.

How many types of Power of Attorney are there? A. B. C. D. 5 2 1 3

Q4.

A document authorizing an attorney to act for a single transaction is known as? A. B. C. D. General Power of Attorney Special Power of Attorney Special Power of Attorney for Registration None of the above

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Q5.

A document authorizing an attorney to act generally, or in more than one transaction is known as? A. B. C. D. General Power of Attorney Special Power of Attorney Special Power of Attorney for Registration None of the above

Q6.

A Power of Attorney can be revoked if A. B. C. D. Revoked by the principal himself Mutually agreed upon by the principal and agent The principal dies or becomes insane or becomes bankrupt All of the above

Will
Q1. Indian Succession Act provides for intestate and testamentary succession for A. B. C. D. Q2. Hindus Muslim Christian All of the above

Which is not the basic restriction on Muslim testator to make a will? A. B. C. D. A Muslim can bequeath only 1/3rd of his property by will The consent of the heirs is needed if the bequeath property is more than 1/3rd A Muslim can make will only with the permission of his heirs All of the above

Q3.

Which of the following options is not true about codicil? A. B. C. D. It must be signed by the testator It must be attested by two witnesses It is an instrument made in relation to a will An instrument made by family members of the testator

Q4.

Which of the following is not the mode of revocation? A. B. C. D. By destruction By marriage By another will or codicil None of the above

Q5.

What is the necessary condition for the testator to revoke the will? A. B. C. D. Sound mind Insolvency of the testator Letter from court Permission from family member

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Q6.

Essential requirement for the person who can attest the will is that he A. B. C. D. must be a relative must be one of the beneficiaries must be lawyer must witness the testator executing the will

Q7.

When does the Will become effective? A. B. C. D. During life time After the death of testator Depend upon testators discretion Decided by the family members

Q8.

If a testator writes in his Will this is my last Will; this sentence is A. B. C. D. A valid sentence An invalid sentence The Court will take decision on the validity of the sentence The family members will take decision on the validity of the sentence

Q9.

What are the advantages of Will? A. B. C. D. Specify the distribution of estate planning Minimize the taxes of estate Avoid the court probation All of the above

Q10. If a testator makes a Will to induce another person to make him comply with his (testators) wish but does not have any testamentary operation or intention, then this Will is called as : A. B. C. D. Concurrent Will Sham Will Disguise Will Duplicate Will

Q11. What is the Will in handwriting called? A. B. C. D. Handy Will Holograph Will Written Will Pen Will

Q12. Who among the following can make an oral Will? A. B. C. D. Soldier Sailor Muslim All of the above

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Q13. Who among the following cannot make Will? A. B. C. D. Lunatics Minors Person imprisoned in jail All of the above

Q14. What is codicil? A. B. C. D. A document use to make alteration to a Will? A gift of land Legal confirmation of Will by court Probate process

Q15. Who among the following can make a Will? A. B. C. D. Any person of sound mind Person reached the age of majority Women All of the above

Q16. The property vests in the executor till A. B. C. D. The death of testator Final distribution to the legaltees The probation process is over The death of executor

Q17. What are the duty/duties of an executor? A. B. C. D. To ascertain the assets of the deceased person To apply for probate whenever necessary To pay testamentary expenses All of the above

Q18. What part of property can a Muslim bequeath through Will without taking any other consents? A. B. C. D. 1/4th 1/3rd 1/2 full

Q19. Which law governs the Will for Indian Buddhist? A. B. C. D. Hindu Succession Law Buddhist Succession Law Indian Succession Law None of the above

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Succession
Q1. The Hindu Succession Law does not apply to A. B. C. D. Q2. Buddhists Jain Parsi Sikhs

What do you mean by intestacy? A. B. C. D. Dying without making a Will Dying after making a Will Executing the Will before death Dying without anyone in family

Q3.

Which of the following does not constitute the Class 1 heirs? A. B. C. D. Son Daughter Father Mother

Q4.

Which of the following does not constitute the Class 1 heirs? A. B. C. D. Son of predeceased son Widow of predeceased son Brother Daughter of predeceased son

Q5.

Which of the following constitutes Class I heirs? A. B. C. D. Father Brother Sister Daughter of predeceased daughter

Q6.

Muslim law recognizes two types of heirs; which of the following is incorrect? A. B. C. D. Sharer Secondary Residuary All of the above

Trust
Q1. How does one create a testamentary trust? A. B. C. D. By Trust Deed By Court Order By Will None of the above

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Q2.

Which of the following is not the advantage of creating trust? A. B. C. D. No probate procedure Saving taxes Not controlled by law All of the above

Q3.

A Public trust can be A. B. C. D. Charitable trust Religious trust Both Religious and Charitable trust None of the above

Q4.

A public trust is created for the benefit of A. B. C. D. Ascertainable person Uncertainable person Family member None of the above

Q5.

Which certainty is essential to constitute a valid trust? A. B. C. D. Intention to create a trust Purpose of the trust Beneficiary All of the above

Q6.

The Indian Trust Act, 1882 is applicable to A. B. C. D. Public trust Private trust Both None of the above

Q7.

Charitable purposes include A. B. C. D. Relief of the poor Education Medical relief All of the above

Q8.

Who can be the beneficiary of the private trust? A. B. C. D. Every person capable of holding property An unborn person Family members All of the above

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Q9.

Under which conditions does a trust get extinguished? A. B. C. D. When the purpose is completely legal When its purpose becomes unlawful When the fulfillment of its purpose becomes impossible All of the above

Q10. Which of the following statements is wrong with reference to wakf? A. B. C. D. No instrument in writing is required to create a wakf Delivery of possession is not required It can be either contingent or revocable It can be made by will

Taxation
Q1. Which are the section of Income tax that deal with Charitable or Religious Trusts and Institutions? A. B. C. D. Q2. Sec 7 to 9 Sec 3 to 7 Sec 11 to 13 Sec 15 to 19

What do you mean by u/s 11? A. B. C. D. Condition of registration with the Commissioner of Income Tax Conditions for claiming exemptions Conditions for claiming exemptions by political party None of the above

Q3.

What are the conditions necessary to get income tax exemptions u/s 11? A. The trust should be registered with the commissioner of Income tax u/s 12A. B. The accounts of the trust for the previous year should be audited if the total income tax exceed Rs.50, 000. C. At least 85% of the income is required to be applied for the approved purposes. D. All of the above

Q4.

15% of the income of the trust is exempt even if it is not spent for the objects. How do we reach this 15% of the income? A. B. C. D. After reducing expenses directly incurred for earning the income After reducing depreciation directly incurred for earning the income After considering the donations and contributions All of the above

Q5.

A trust can accumulate or set apart its income for a specified purpose. Which of the following conditions is incorrect with regards to this? A. B. C. D. Has to inform the concerned officer about this The period for which the funds can be accumulated cannot exceed 5years Total amount of accumulated fund shall not exceed 10 lakh/annum The amount so accumulated should be invested in the specified investments

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Q6.

In trust or institution, when does the income from business become eligible for exemption? A. The business carried on should be incidental to the attainment of the objects of the trust/ institution B. Separate books of account should be maintained in respect of such business C. Both of the above option D. None of the above option

Q7.

Select the case(s) when income shall not be exempt u/s 11 to 13. A. The income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public B. The income of a charitable trust or institution created for the benefit of any particular religion, community or caste C. Any income of a trust derived from unapproved investment D. All of the above

Q8.

How much exemption will a donor get on the amount given by him in any approved fund or institution established for charitable purpose? A. B. C. D. 100% exemption on the donated amount 50% exemption on the donated amount 100% exemption but subject to equal or less than 10% of total income None of the above

Tools
Q1. Advantage(s) of partition of HUF from the point of view of Tax incidence is (are) A. B. C. D. Q2. No tax on capital gains No withdrawal of development rebate and investment allowance No gift tax All of the above

How can a property be transferred? A. B. C. D. By Sale By Mortgage By Exchange All of the above

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Answers
Estate Planning Question 1 2 Answer A A Succession Question 1 2 3 Power of Attorney Question 1 2 3 4 5 6 Will Question 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Answer C C D D A D B B D B B D D A D B D B A Answer A B B B A D Trust Question 1 2 3 4 5 6 7 8 9 10 Answer C C C B D C D D D C Tools Question 1 2 Answer D D 4 5 6 Answer C A C C D B Taxation Question 1 2 3 4 5 6 7 8 Answer C B D D C C D D

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