Mumbai | Silicon Valley | Bangalore | Singapore | Mumbai-BKC | New Delhi | Munich

© Nishith Desai Associates

TRUST AND ESTATE PLANNING FOR INDIANS AND NRIS

STEP MAURITIUS 26 MARCH 2015

Megha Ramani

WHAT IS ESTATE PLANNING?

2

Applicability of Indian law

7

Persons

Resident of India (deceased or heirs)

Domiciled in India

Property

Immovable property located in India of a person domiciled anywhere

Movable property of person domiciled in India

Income tax

Resident

Non-resident

Transfer of assets / moneys

From India

Into India

Estate planning when no Estate Duty?

8 © Nishith Desai Associates

[Wealth]

Gift (Income)

Inbound

Outbound

Testamentary Intestate

Estate/ Succession

Management

Exchange Controls

Taxation

Succession/ Personal

laws

Income

10

Domicile Immovable Movable

in India Outside in India outside

In India Indian law Lex situs Indian law India / as per conflict of law principles applicable in that country

Outside Indian law Law of domicile Law of domicile

Law of domicile

Indian conflict of law rules

Indian Succession Act, 1925:

• Incorporates principles of private international law. India does not appear to have incorporated renvoi but no binding ruling on this yet.

• Lays down procedural rules for testamentary succession

• Intestate succession - Lays down law for intestate succession except for Hindus, and Muslims

Testamentary Succession

11

• Subject to personal law, any person can will away all his assets by Will.

• A Hindu can will away his personal undivided share in HUF property.

• There is no general rule of forced heirship except under Muslim law which permits

only 1/3rd property to be bequeathed.

Essentials of a Will:

• Has to be in writing, by a major of sound mind with free consent

• Must be signed by the testator, witnessed and attested by two persons, present at the

time of execution of the Will

• Must be a declaration of intent of the testator with respect to his property

• Must specify that the testator’s intent should be carried out after his death.

Digital Assets Succession

Through a Will

Rapidly-changing nature of digital

assets and lack of comparable

counterparts in the physical world

make inclusion in traditional Will

complicated

Wills become public at probate.

This problem can be avoided by

having the Will reference a

separate document containing any

passwords etc.

Through a Trust

Trustee can own a digital asset in

trust

Trust survives owner’s death

No publicity at probate

Trusts are easily amendable

Trusts do not have to conform to

procedural requirements

12

Applicability of FEMA

Indian Resident Settlor Non-Resident Settlor

14

Indian Assets Offshore Assets

Resident

beneficiary

NR

beneficiary

FEMA not

applicable Consider

FEMA

Resident

beneficiary

NR

beneficiary

Consider

FEMA

Certain

Issues

Indian Assets Offshore Assets

Resident

beneficiary NR

beneficiary

Certain

Issues Consider

FEMA

Resident

beneficiary

NR

beneficiary

Consider

FEMA FEMA not

applicable

Use of mirror trusts by NRIs

17

NRI India Offshore Jurisdictions

IRREVOCABLE [DISCRETIONARY]

TRUST

IRREVOCABLE [DETERMINATE]

TRUST

INVESTMENTS INVESTMENTS

[Indian Settlor]

Recent Developments

Finance Bill 2015:

• Additional surcharge on HNIs, abolishing wealth tax

• Corporate tax residence to be ‘place of effective management’

• Crack down on black money offshore and domestic

The Undisclosed Foreign Income and Assets Bill, 2015:

• Non-disclosure of foreign income and assets is chargeable to 30% tax with a penalty of three times the tax due and rigorous imprisonment of between 3-10 years.

• A one-time short compliance window has been provided for taxpayers to come clean. Tax and penalty are payable but there is immunity from prosecution.

• Liability for abetting or inducing another to willfully attempt to evade tax or to make false statements/declarations in relation to foreign income and assets: Rigorous imprisonment between 6 months-7 years and fine

18

Thank You!

nda@nishithdesai.com

Mumbai | Silicon Valley | Bangalore | Singapore | Mumbai-BKC | New Delhi | Munich

© Nishith Desai Associates