Making a Valid Will
A Will is a disposition of property made by a person during his lifetime but which is intended to take effect only after his demise. A Will takes effect only on the death of its author or testator. During his lifetime, the Will remains an ambulatory document which can be revoked at any time without any legal difficulty whatsoever. For a valid Will, it is necessary that it should be made in conformity with the law of the country in which the immovable property is situated. It should also be in conformity with the law of the testator’ s domicile which means the domicile of the testator at the time of making the Will. Wills made by Hindus, Buddhists, Jams and Sikhs as per the Hindu Wills Act, 1870, read with the Indian Succession (Amendment) Act, 1926, are required to be in writing, signed by the testator, or any person in his presence by his direction, and attested by at least two witnesses. There is no particular form of Will prescribed by law.
An important aspect of the Will is a clause regarding the appointment of an executor or executors. Where the Will contains a trust, trustees should also be appointed. Legacies and devices in a Will can be specific as well as general. A specific legacy or device is the bequest of a definite thing or property out of the estate of the testator. Annuity can also be granted under a Will, which means a fixed payment of money periodically. A Will does not require any stamp paper. It can be simply written on plain paper in any language.
Creation of HUF through a Will
One of the important means of tax planning to be adopted through a Will is the creation of a Hindu Undivided Family by way of transfer of property to one’s son, spouse and children in such a manner that all these persons can constitute a separate Hindu Undivided Family if there is no such HUF already in existence. This Hindu Undivided Family would be able to enjoy the separate exemption limit applicable to it under the Finance Act for the time being in force.
Bequests to Family Members
Bequests can be made to minor children or minor grand children of the testator through a Will. Similarly, a Will can be adopted as a proper device for transfer of property by way of bequests to other members of the family including daughters-in-law and other relatives as a result of which there would be a lot of income tax saving. Funds could easily be transferred to one’s spouse through Will and obviously the provisions of clubbing under Section 64(1) of the I.T. Act would not be applicable.
Tax Planning for a Discretionary Trust through Will
A discretionary trust can be created through a Will for the benefit of some persons particularly the members of the family whether alive at the time of making the Will or to be born later. It would not be hit by the provisions of Section 164 of Income Tax Act regarding the charging of income tax at maximum marginal rate in the case of a discretionary trust. This is because it is provided in clause (ii) of the first proviso to Section 164(1) of the iT. Act that if there is only one trust declared by a Will, then the income of the discretionary trust would be chargeable to income tax as if it were the total income of an individual or an association of persons. Thus, income tax saving up to ` 50,000 per year could be achieved.