Going Beyond Armchair Advice
We all know that writing a Will is important, yet most of us never write it before it’s too late. As estate planners, we often see our clients struggle with the consequences of the lack of a Will when a family member passes away.
Working through a lack of estate planning when you are grieving brings in a barrage of emotions from anxiety to panic. In such a turbulent time, clients don’t only need good advice but also experienced help and trustworthy support. That’s the reason we decided to go beyond preventive armchair solutions about ‘what should be done’ to providing complete support and hand-holding when the bereaved family members are rendered clueless and anxious due to the lack of a Will.
Sreenath was one such client.
Sreenath’s uncle, his father’s elder brother, Madhavan was a generous and kind-hearted man who lived as bachelor in an independent house in a prime area in central Chennai.
Madhavan was in his 70’s and his divorced sister and her son Murli who was blind from birth also lived with him. He had thought of making a Will but there always seemed to be time to do that. He also wanted to provide for Murli after his death because he knew that due to his blindness Murli would never be capable enough to manage his financial affairs with acumen.
Covid disrupted Sreenath’s family’s dreams— Madhavan and his sister (Murli’s mother) died within a few months from each other. Murli was left alone in Chennai and could only turn to Sreenath’s widowed mother for help. As Sreenath and his sister both lived overseas, they couldn’t visit their bereaved mother and cousin till the Covid restrictions waned. Till then there was a lot of unrest in the minds of everyone.
Sreenath’s widowed mother was elderly and infirm and his cousin Murli was not savvy enough to work through the legal requirements. The family also realised the amount of legal work to be done to secure the immovable and movable property would be time consuming and tedious.
Who would inherit?
According to law, as Madhavan died without a Will and had no children or spouse, Sreenath, his sister and Murli became his three beneficiaries. Murli was blind from birth and needed support and care.
Who would manage the legalities?
In lieu of a Will the heirs needed to apply for a Letter of Administration. It is tedious legal process and usually people receive it in 6 months post application.
The expectations on working out the legal details naturally fell on Sreenath as the eldest cousin. His sister also decided that it would be best if he managed it for all of them. But Sreenath couldn’t leave his job and stay in India for 6-8 months.
Looking for a practical and trustworthy option, Sreenath contacted our team at PlanMyEstate Advisors while he was in Seattle and felt reassured with the full-range of support, advise and handholding we provided. That’s how we got involved in this unique situation.
Assessing the situation:
The one big positive the call with Sreenath uncovered was that there were no animosities among the cousins. Both Sreenath and his sister wanted to provide for Murli and planned that he and their mom stay together. They wanted to take care of both their requirements and had decided to sell Madhvan’s property (valued at appx Rs 6 crores along with the vacant land) and buy a small apartment in a gated community for Murli and their mom and keep the balance amount in a FD for their maintenance.
Sreenath and his sister had a sensible plan but because of a lack of Will this simple process got convoluted as
a
The family had to wait till Sreenath and his sister arrived in India and started the process for the Letter of Administration
B
Since the property would be transferred to all the three beneficiaries, the two US residents would need to pay their respective share of capital gains tax in India, which meant that Sreenath and his sister would have to apply for a PAN card and comply with various formalities
c
Both of them would also need to open NRE/NRO accounts in India to receive the sales proceeds and comply with RBI and Income tax formalities for remittance of the proceeds.
D
They also needed to find trustworthy real-estate dealers in Chennai for selling the house and also for finding a new house for Murli and their mom.
Our plan of action
With our guidance, Sreenath now knew the important steps to take and this came as a major relief for him and his sister. We systematically planned the work for them in various phases.
Phase 1: Before they arrived in Chennai
- We recommended the bank for opening their accounts and assembled all the necessary documents.
- Our team did all the groundwork for preparing the application for the Letter of Administration and PAN cards.
Phase 2: Post their arrival in Chennai
- Our team met with them to list all the assets of Madhavan. Some fixed deposits and mutual funds which were discovered when going through the bank statements and emails.
- We also helped them in completing the process for filing of the Letter of Administration, PAN card applications and opening of the bank accounts.
Phase 3: After their departure
- Our team did all post-filing administration work, including addressing objections from the Testamentary department, issuing advertisement, etc
- We kept Sreenath updated with weekly reports about the progress. Thus the siblings were able to work through this situation without much disruption to their routine.
Phase 4: When the Letter of Administration came through
- Our team got in touch with the mutual funds and banks which held the assets of Madhavan, got all the paperwork ready for redemption/transfer of the funds.
- Next we appointed one of our empanelled real estate brokers in Chennai for screening prospective buyers and shortlisting the best offer.
- Once all the groundwork was done, we again requested the two siblings to come down to Chennai
- In Chennai our team then provided complete support and seasoned advice till all the assets were realised and distributed to all the beneficiaries.
- We also helped them find a good apartment for Murli and their mom and created an investment plan for meeting their monthly expenses.
Could Madhavan have managed this eventuality in a more planned manner?
Definitely. Planning always helps. If Madhavan had planned for his estate during his lifetime, he could have saved his family members a lot of worry and bother.
Another point to note is that usually buyers are a little wary when they have to buy a property which has many title holders and if one of them is visually impaired, then the buyer’s perception of risk increases.
How could have Madhavan save his loved ones all this bother and anxiety?
Madhavan could have written his Will and expressly stated in the Will that the Executor shall dispose of his house and distribute the proceeds in the manner as specified in the Will. There are multiple benefits of doing this:
01
This would have saved his family time taken in decision making and reaching a consensus. Expressing how you want your assets to be distributed amongst your kith and kin eases the process for everyone and reduces the unnecessary strain on them.
02
The prospective buyer of the house would have to deal with only the Executor of the Estate as against three joint owners (one of whom is blind).
03
The tax formalities and obligations would be on the deceased’s estate, saving the beneficiaries of unnecessary and avoidable hassles under the Income Tax Act.
or
Madhavan could have sold the house during his lifetime and taken a large apartment on rent so that his nephew and niece were saved the trouble of finding all the old ownership documents and a suitable buyer for such a large property. This solution is ideal but it requires a lot of planning and a deep desire for wrapping things up properly so that there are no loose ends.