Creating a Will

Estate planning ensures that NRIs can transfer their wealth and property in India to their legal heirs without legal disputes, tax complications, or delays. A well-structured plan includes a will, trusts, nomination, and power of attorney, considering succession laws and tax implications in both India and the NRI’s country of residence.

Importance of Estate Planning for NRIs

Avoid Legal Disputes: Ensures assets go to intended beneficiaries.
Minimize Tax Liabilities: Helps reduce tax burdens in India and abroad.
Compliance with Indian & Foreign Laws: Prevents legal complications in cross-border wealth transfer.
Efficient Property Management: Assigns a trusted person to manage assets in India.
Quick & Hassle-Free Transfer: Avoids delays due to legal challenges or intestate succession laws.

Key Components of Estate Planning for NRIs

Will Creation for NRIs

A will is the most critical document in estate planning, specifying how your wealth and property in India should be distributed after your demise.

Why NRIs Need a Will?

Ensures wealth distribution as per your wishes.
Prevents legal disputes among heirs.
Enables smooth transfer of Indian bank accounts, properties, and investments
Overrides India’s succession laws, which apply if there’s no will.
Helps avoid lengthy probate processes.

How NRIs can Draft a Legally Valid Will?

List All Assets in India – Include bank accounts, real estate, stocks, insurance, jewelry, etc.
Appoint Beneficiaries – Clearly mention who will inherit what share.
Name an Executor – Choose a reliable person (family member, friend, or lawyer) to execute your will.
Sign in Front of Two Witnesses – The will must be signed by you and at least two witnesses (who are not beneficiaries).
Register the Will (Optional but Recommended) – Though not mandatory, registering your will with the Sub-Registrar in India strengthens its authenticity.
Mention Guardianship for Minor Heirs – If you have children under 18, appoint a guardian to manage their inheritance.
Keep the Will Updated – Modify it in case of asset purchases, marriage, or changes in family structure.

Where Can an NRI Write a Will?

NRIs can draft a will abroad for their Indian assets.
The will should follow Indian succession laws to avoid complications.
If written abroad, it must be probated (validated) in an Indian court after death.

Note: If you have assets in multiple countries, it is advisable to create separate wills for each country to prevent conflicts.

Probate & Execution of a Will in India

Probate is a legal validation of a will by an Indian court before execution.

When is Probate Required?
If the will involves immovable property in Mumbai, Chennai, or Kolkata.
If the will is challenged in court.

How to Execute a Will in India?

Executor files for probate in the relevant Indian court.
Legal notices issued to beneficiaries and potential heirs.
Court verifies authenticity and issues probate.
Assets transferred to beneficiaries.

Trusts for NRIs – Alternative to a Will

A trust is a legal entity where a settlor transfers assets to a trustee to manage for the benefit of designated beneficiaries.

Types of Trusts for NRIs

Revocable Trust – Can be modified or revoked anytime.
Irrevocable Trust – Cannot be changed once created (useful for tax benefits and asset protection).
Private Trust – Created for specific beneficiaries (e.g., family members).
Charitable Trust – For religious, educational, or public welfare purposes.
Living Trust – Created during the lifetime of the settlor
Testamentary Trust – Created as per the will, after death of the settlor

Why NRIs Should Consider a Trust?

Helps avoid probate delays in Indian courts.
Provides tax benefits on inheritance.
Ensures financial security for minor children or dependents.
Protects assets from legal disputes.

Best for NRIs who:

Have significant wealth in India.
Want to avoid probate or legal delays.
Have minor children or dependents.

How NRIs can create a Trust?

Define the Trust’s Purpose & Assets

Decide whether the trust is for wealth transfer, tax planning, or asset protection.
Identify which properties, investments, or bank accounts will be transferred.

Choose Trustees & Beneficiaries

Select a trustee (can be a family member, legal advisor, or corporate trustee).
Clearly list beneficiaries (family members, children, spouse, or even a charity).

Draft a Trust Deed – A legally binding document specifying:

Settlor’s details (who creates the trust)
Trustee’s responsibilities (who manages the trust).
Beneficiaries and distribution plan.
Dissolution terms (if applicable).

Register the Trust

Registration is required for trusts holding immovable property.
Trusts without real estate do not require mandatory registration in India.

Transfer Assets to the Trust

Move bank accounts, shares, real estate, or business holdings into the trust’s name.

Compliance & Tax Filing

Trusts in India must file tax returns annually.
NRIs should check cross-border tax implications if the trust has global assets.

Power of Attorney (POA) for NRIs

NRIs often face difficulties in managing their Indian assets from abroad. A Power of Attorney (POA) allows you to appoint a trusted individual to manage your affairs. Types of Power of Attorney for NRIs

General POA – Broad powers to handle multiple legal and financial matters.
Special POA – Limited to specific tasks (e.g., selling a property, managing bank accounts).
Durable POA – Remains valid even if the principal becomes incapacitated.

How NRIs Can Execute a POA?

Draft the Power of Attorney document.
Get it notarized in the foreign country where you reside.
Have it attested by the Indian Embassy/Consulate.
Send it to India for stamp duty payment and registration (if needed).

Best for NRIs who:

Have property or investments in India.
Want someone to handle financial/legal matters on their behalf.

Nomination for financial assets

Nomination designates an individual, or a group of individuals, to receive the funds in case of the account holder’s death as per the distribution pattern mentioned in the nomination. This process ensures a smoother transfer of funds to the designated beneficiaries, often family members or legal heirs.

For all the bank deposits, shares, MFs and all the assets, an NRI should do nomination so that nominee can claim the assets after the death of the owner.

Indian Succession Laws for NRIs

If an NRI dies without a will, their assets in India will be distributed based on Indian succession laws:

Hindu Succession Act (1956) – For Hindus, Sikhs, Buddhists, and Jains

Class I Heirs (spouse, children, mother) inherit first.
Class II Heirs (father, siblings, extended family) inherit if no Class I heirs exist.

Muslim Personal Law (Sharia) – For Muslims

One-third of the estate can be willed freely.
The rest follows Islamic inheritance laws.

Indian Succession Act (1925) – For Christians, Parsis

Spouse and children inherit equally.
If no spouse or children, parents inherit.

Note: A will ensures your assets are distributed as per your wishes, not the default succession laws.

Taxation on Inherited Wealth for NRIs

India does NOT have an inheritance tax. However, taxation applies on income from inherited assets.

Tax on Inherited Property in India

No tax on inheritance itself.
Capital gains tax applies if the heir sells the inherited property.
Rental income from inherited property is taxable in India.

Tax on Other Inherited Assets

Bank Deposits – Interest earned is taxable in India.
Mutual Funds & Shares – Capital gains tax applies upon sale.

Double Taxation for NRIs

Some countries (USA, UK, Canada) have inheritance tax. NRIs should check Double Taxation Avoidance Agreements (DTAA) to avoid paying tax twice. It would be advisable to consult an NRI tax expert to structure inheritance tax-efficiently.

Offshore trusts for NRIs

Please consult your financial advisor for more details.

Offshore banks for NRIs