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Wealth Transfer Planning: 6-Step Checklist For Easy Wealth Transfer

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Wealth Transfer Planning: 6-Step Checklist For Easy Wealth Transfer

As of March 2023, Rs 42,272 crores sit idle in banks due to lack of wealth transfer planning. It is a multifaceted process that goes beyond simply drafting a will. It involves thoughtful consideration of legal, financial, and personal factors to ensure that your assets are distributed efficiently and aligned with your wishes.

This comprehensive guide will explore key strategies for effective wealth transfer.

1. Creating a Will

A will is the foundation of any estate plan. Here’s why it matters:

  • Asset Distribution: A will allows you to specify how your assets should be distributed among your heirs. You can designate beneficiaries for specific properties, investments, and personal belongings.
  • Executor Appointment: You can name an executor who will manage your estate, pay debts, and fulfill your wishes.
  • Guardianship: If you have minor children, a will allows you to appoint guardians to care for them in your absence.

2. Establishing Trusts

Trusts offer flexibility and control over asset distribution. Consider the following types of trusts:

  • Revocable Living Trust: This trust allows you to maintain control over your assets during your lifetime while avoiding probate. You can amend or revoke it as needed.
  • Irrevocable Trust: Once established, an irrevocable trust cannot be changed. It provides tax benefits and protects assets from creditors.
  • Special Needs Trust: Designed for individuals with disabilities, this trust ensures their needs are met without jeopardizing government benefits.

3. Gifting Assets

Strategic gifting during your lifetime can reduce your taxable estate. Here’s how:

  • Annual Gift Tax Exclusion: You can gift up to a certain amount (currently Rs 50,000 per recipient) annually without triggering gift taxes.
  • Direct Payments: Paying for medical expenses or educational costs directly (such as tuition) on behalf of a family member is also a tax-efficient way to transfer wealth.

4. Life Insurance Policies

Life insurance serves multiple purposes in wealth transfer planning:

  • Liquidity: Life insurance provides immediate cash to cover estate taxes, debts, and other expenses.
  • Tax-Free Benefit: The death benefit paid to beneficiaries is generally tax-free, making it an efficient way to pass on wealth.

5. Family Limited Partnerships (FLPs)

FLPs are useful for business owners and high-net-worth families:

  • Business Succession: FLPs allow you to transfer business interests to the next generation while retaining control. This can minimize estate taxes.
  • Asset Protection: FLPs shield family assets from potential lawsuits and creditors.

6. Charitable Giving

Consider philanthropy as part of your wealth transfer plan:

  • Reducing Estate Taxes: Donating to qualified charities can reduce your taxable estate.
  • Legacy and Values: Leaving a charitable legacy reflects your values and positively impacts society.

Wealth Transfer Planning: Tax Considerations

1. Inheritance Tax (In India)

Inheritance Tax is the tax levied on property or assets transferred to legal heirs upon someone’s death. However, in India, the concept of levying tax on inheritance does not exist anymore. The Inheritance or Estate Tax was abolished with effect from 1985.

2. Income Tax Implications on Inherited Property

When an individual passes away, properties belonging to the deceased are transferred to legal heirs. Without any consideration in return, this transfer could qualify as a gift for income tax purposes. However, the Income Tax Act specifically excludes the transfer of assets under a will or inheritance from the purview of gift tax. Therefore, property received by way of inheritance is not subject to taxation.

3. Tax on Income from Inherited Assets

Often, inherited property generates income (e.g., rent, interest). When the heir becomes the owner, any income from the inherited asset must be declared and taxed accordingly. For instance, if an inherited commercial complex generates rent, the new owner (legal heir) is liable to pay taxes on that rental income.

4. Tax on Subsequent Sale

As the legal heir, you can choose to sell the inherited property. The capital gain or loss from the sale will accrue to you. The holding period (duration the property was held by both you and the deceased) determines whether it falls under long-term or short-term capital gains tax. Proper tax planning is crucial when selling inherited assets.


Wealth transfer planning is not a one-size-fits-all process. Consult with professionals, including estate planning attorneys and financial advisors, to tailor a plan that aligns with your unique circumstances. Regular reviews and adjustments ensure that your legacy endures and your loved ones are well cared for.

Remember, wealth transfer is not just about numbers; it’s about preserving your family’s story and values for generations.


  1. What is Wealth Transfer Planning?

    Wealth transfer planning is the process of arranging the distribution of an individual’s estate in a way that is efficient, tax-effective, and in accordance with their wishes.

  2. Why is creating a will important?

    A will is crucial because it allows you to:
    Specify asset distribution among heirs.
    Appoint an executor to manage your estate.
    Designate guardians for minor children.

  3. What types of trusts can be established?

    Trusts can be:
    Revocable Living Trust: Amendable and helps avoid probate.
    Irrevocable Trust: Offers tax benefits and asset protection.
    Special Needs Trust: Supports individuals with disabilities without affecting government benefits.

  4. How does gifting assets affect wealth transfer?

    Gifting can reduce your taxable estate through:
    Annual Gift Tax Exclusion: Gifts up to a certain amount (currently Rs 50,000 per recipient) are not taxed.
    Direct Payments: Paying for medical or educational expenses directly is tax-efficient.

  5. What role do life insurance policies play?

    Life insurance policies provide:
    Liquidity: To cover estate taxes and debts.
    Tax-Free Benefit: Beneficiaries receive a tax-free death benefit

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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