How parents can transfer wealth to their children

economictimes.indiatimes.com:

Dr. Prashant Patel is 75 years old and retired. During his lifetime, he succeeded in accumulating a large amount of wealth from his investments.

He has three children and is currently living with his older son’s family. His younger son works in the UK, while his daughter is married and employed as a doctor. He knows that his children are aware of his personal wealth and are hoping to inherit it.

He would like to ensure that his wealth is equitably distributed among his children without dispute, procedural hassle and in a tax-efficient manner. How can he ensure this? Nomination is a simple way for parents to ensure that their investments are transmitted to their children. The other, simpler option is gifting these to children, but it is an irrevocable process.

A will that seeks the formation of a trust or a Hindu Undivided Family (HUF) is taxefficient. Patel needs to choose options that are flexible and also help save tax. Inheritance itself is not subject to wealth tax in India, though the income from inherited wealth is taxable.

Patel will have to go through detailed documentation for any of the processes in the transmission of his wealth. If he chooses nomination as the route, he can change the nominee any number of times during his lifetime. To get the investments transmitted to themselves, his children will have to provide documentation as required.

It is also important to note that transmission does not amount to final settlement under succession laws. The nominee only holds the wealth as a trustee until disputes, if any, are settled. He can consider writing a will, which can also be amended by him at anytime.