One of the most integral part of personal finance management and financial planning is estate planning. It is something very important to know and hence we would like you to read it to the end.

What is Estate Planning?

Estate is everything that one owns viz. assets & owes viz. liabilities and responsibilities. Please do not confuse it with Real Estate and in this context, it is a completely different thing. Estate Planning is a process of arranging and planning a person’s succession and financial affairs. An Estate Plan incorporates a person’s wishes about his estate - this could be regarding his estate management, preservation, distribution and his estate legacy post life. The main thing though remains as to how your estate will devolve upon your loved ones post your demise.

Estate Planning is for whom?

There is never a right age or any particular level of financial wealth required to engage in estate planning. It is for all ages and for every person to wishes to ensure a smothe transfer of assets due to his/her incapacitation or demise. Thus, it is irrespective of age and portfolio size, for everyone including you and me.

Think of it as the other side of buying a life /term insurance. Why did we buy the life policy? An estate planning also has similar justification, similar logical reasoning.

Do you really need it?

Most of us as individuals place a lot of importance is wealth creation. However, we often neglet the need to ensure preservation and succession of wealth. That is often left to destiny and that should never be the case. In the last few decades, our societal fabric and landscape has gone huge change. We now see more nuclear families, less of huge joint families, more financial awareness and need for personal financial security. In such scenario, it is not difficult to visualise disputes and legal issues which can be a challenge for entire families. Proper estate planning will be an answer to this issue.

On the other hand, most of us also believe that nomination and joint ownership is a way of estate planning. You will be surprised to know that both, nomination and joint ownership of assets is ineffective and legally disputable. The succession laws of the land supercedes everything and at the end of the day, assets will have to be distributed as per laws and not as per nomination or joint ownership. They will be merely treated as recipients and custodians of assets on behalf of the legal heirs till transfer.

Methods of Estate Planning:

One can plan his estate in two ways (a) by writing a Will or (b) by creating a Trust.

A Trust involves transferring of one’s estate to a Trustee for the benefit of certain beneficiaries which may include the person creating the Trust who is called as the Settlor. A Trust provides for management of the estate during one’s lifetime and also provides for distribution and management of one’s wealth post demise in a planned manner over a period of time.

A Will is the simplest and the most traditional way of distribution of assets by a person. A Will is legal declaration of the intention by the one making it – the testator – with respect to property that he/she desires to be carried into effect after his death. A Will is likely to be more relevant and of interest for most of us.

Advantages of Estate Planning

1. Get property and assets to loved ones quickly: After the death of an individual, the legal formalities and transfers take time and the family generally has to wait a long time to get everything in order. With proper estate planning and a latest will in place, you can avoid this delay for your family and they can get everything in order quickly. This becomes even more important if you are the bread earner of the family. Your dependents in most cases are not even aware of your entire estate and also the various investments that you must have made. A detailed will helps them getting all the affairs in order.

2. Minimize expenses: A lot of money needs to be spent in lawyers' fees and legal expenses in case of absence of an estate plan. An even higher amount of money is spent in case there are family disputes. One can avoid this hassle by simply creating a will and ensuring that a proper estate plan is in place.

3. Reduce Tax burden: When a property is transferred without a will or through a court case, one has to pay capital gain tax. This tax is avoided when one inherits or receives the property via a will. Similarly, estate planning can help you avoid a lot of taxes. One example can be making a trust. If a trust is set in place in a proper manner, you and your family can avoid paying taxes.

4. Plan for incapacity: While most people are convinced that estate planning is for old age, that is not true. Life is unpredictable and anything can happen at anytime. It is possible that one becomes incapacitated because of some unfortunate accident or sudden medical condition which leaves them unable to manage their financial affairs. In estate planning, one can ensure for both financial and healthcare decisions in case of incapacity. This can help you and your family in difficult times.

5. Support your favourite cause: An individual can leave a fixed amount as donation or as charity to a cause he or she wishes. In often cases, where a proper will has not been made, these causes go unnoticed as the family is unaware of the deceased wishes.

6. Assign a legal guardian for your children: In unfortunate cases where both the parent pass away and the children are still minors, the court decides who the legal guardian to the kids will be. However, with estate planning, you can assign a legal guardian in case of any unfortunate incidents and make sure that your kids go into safe and kind hands.

We have all struggled to stay in budget. Each time we get our salaries or income from the business, we vow to save more money and reduce expenses on unnecessary items but end up pushing the agenda for the next month.

It is important to have some sort of control over your spending and being able to save some money for not just emergencies but also for the future. Any individual should save some, to make their future better, to be able to build assets and afford things which currently seem unaffordable. It is important that you understand the opportunity cost of spending money. Like, could the money you spent on the luxury watch be better used for your sons' education fund? Or could the expensive phone that you juts upgraded be avoided in order to save up for a better house?

While certain expenses like rent, loan EMIs, education and basic amenities are necessary and unavoidable, one can definitely control their discretionary expenses. Here are a tips which can help you to control your discretionary spending:

1. Monitor your expenses

You cannot change or control something if you don't know where you are going wrong. In order to spend less, you need to understand and realise where you have been spending more than what is needed or where you have been spending is unnecessary and avoidable.

So, note down as many expenses you can remember for the past few months and look at the areas where you have spent your money. You can divide them into groups, like basic utilities, travel, shopping, luxury items etc. Expenses on items like house rent, electricity bill, phone bill, groceries form a part of basic utilities and of course cannot be avoided but they should be kept in check. You should know how much you are spending. This will help you in realising how much of your spending is necessary and basic and how much is discretionary. Further, once you realise what your discretionary expenses are and where are these expenses mostly meant towards, you can control it.

For example, if you have been spending a lot on eating out and you realise this after monitoring and judging your expenses, you can be careful about it. Of course, you cannot and should not completely cut eating out, both change and socialising is necessary, however, you can control when you have been too lazy or too bored eat to at home.

Also, if you observe that you have been spending a lot on shopping for things you don't need, it maybe wise to go on a shopping hiatus for a while. Thus, monitoring your expenses will help you control them as well.

2. Make a budget

Making a budget is the very basic step to control your expenses. It is simple and effective. Once you make a proper budget, you will know how much you spend on a particular arena and thus it will be easier for you to control your expenses.

While, you may say that making a budget will not actually make you stay in one, whether you stay in it or not, you will still save more than general. This is because once you make a budget, you make a mental note on how much to spend on what. Now, while you are crossing that mental limit, you will realise that you are going over limit and thus will not be as reckless as you would have been without that reminder. Thus, even if you don't stay within the budget, you will at least benefit by spending lesser than general, which is the whole point of making the budget.

One point to remember while making the budget is to be realistic about it. You cannot expect to cut down your expenses by 40-50% in the very beginning. In fact, spending 40-50% less is very difficult even if you learn to spend less. Make sure that the budget you are making not just covers your basic needs but also gives you a little margin to spend on unforeseen expenses and also that it doesn't cut you out from everything but just helps you save some extra amount.

3. Cut yourself at the source

If you are someone for whom saving is extremely difficult, you can set automatic transfers which will leave you with lesser money. For example, you can get a different account and set up an automatic transfer at the beginning of the month. So every month a specific amount is automatically deducted from your account and saved in another account. If you want to be very stern with yourself, make withdrawal from the account difficult. Don't get a debit card for it or ask your family member to change the pin and not tell you.

Similarly, you can also start an SIP to a liquid fund or other instruments, which will help you save and invest more.

While there are many more ways you can save, these three simple step should cover you in a basic and extensive manner.

Need for more wealth is never ending. We want to be wealthy, free from stress, free from monthly rents, mortgages and wish to pursue our passion. But the irony is, only a few from the lot are able to achieve financial freedom. It's not that we don't work hard, we all do, but something is wrong somewhere and we don't really handle it well. Why can't we be wealthy in spite of the struggles that we go through each day even after years? We often wonder what is it that the wealthy do and we are not doing?

For becoming wealthy, you have to earn, save, invest, and thus multiply what you earn. We all know this, however there are some personality traits which are becoming boulders in our way to success. Today we will talk about some of these traits...

Procrastination: We fail because we do not start on time, we keep on waiting for the right time, not realizing that if we do not start, the probability of winning is zero. Most of us are in the 'planning to invest' stage since ages, but this planning never ends, and we seldom move on to the next stage of 'executing'. We know that we have to invest to save tax, to meet our future goals, to build wealth, but there is something stopping us to actualize it. '“I'll start an ELSS SIP this year”, and I say this each year', is the problem.

Band Wagon: My neighbour is rich, I'll do what he is doing; This is a common problem, if my neighbour is doing well in his car modifying business, I'll also want to do the same business, not realizing the fact that he is a mechanical engineer, he has a passion for cars and it's not there in my blood. We have to identify what we are good at, what excites us, and then choose our career. This starts from our education and extends to our career, If economics excites you, don't take computer science because it is more popular, and all your friends are choosing CS.

Lack of well framed goals: We want to achieve a lot, but if someone asks us what do you want to do in life, or how do you see yourself ten years down the line. Most of us would have vague answers, since our goals are not clear. We don't know what we want to achieve and what we are working for. And no matter how much we struggle, working without a mission is like a ship without a helm. You'll never reach the shore if you don't have a direction in life. You should have well framed goals and the time horizon to achieve them, before investing for those goals.

Indecisive: Another major pit on our path to success is our inability to take decisions and to abide by them. At first, we are not able to decide whether to invest or not, then when to invest, and finally where to invest. And if at all we invest, we easily lose conviction in our decision and keep on changing our investment pattern, we sell what we have and buy something which our friend suggested. The cycle repeats in many forms and we end up wasting the time and efforts involved in making each investment. Result, we don't end up anywhere.

Personal life: Not having a happy married or family life, can be one of the biggest contributors to misery. It destroys your goals, your self confidence, your plans and your inner peace. In order to be wealthy, you have to start from your home and you have to maintain harmony and understanding in your relationships and invest time, care, love and concern in people around you.

Lack of patience: We all want to make money and make it quick. Unfortunately, financial success is all about patience and time. Once you invest, you have to be patient and see it rise and fall, until it reaches a point where it serves your purpose. Often a fall in the investment pulls the rug from under our feet, and this state of panic leads to wrong investment decisions. We have to control our emotions when the times are bad and wait till the clouds roll by.

Some people just don't want to take risk: Some people are adventurous, and invest in high risk high return products, and at times lose the principal as well. And there are some, who do not want to risk their money at all, even if their age and financial position allows them to take some risk, they won't. And both extremes, do not make money. Risk and reward go hand in hand, you have to take risk, to build your wealth, but it should be calculated on the basis of financial backgrounds, goals and risk appetite.

Standard of living: We tend to imbibe the standard of living of our acquaintances. We buy things which we do not require and we cannot afford, in order to maintain a lifestyle and social status. A Levi's jeans is equally good as a Diesel jeans and both serve the purpose, the reason spend Rs 16,000 on a Diesel jeans in the snob appeal it presents. If we cut down the expenses which are not necessary or stop paying a premium, not

for quality but for brand value, we'll be able to save a lot. And these accumulated savings, if invested wisely, will add to our better future.

Idle cash and savings A/c: Cash lying in a pot buried in your backyard or in your savings bank A/c is not building wealth for you. If you are keeping cash with a view to ensure safety and liquidity, you do not realize that the prices of consumer goods are increasing at around 7% annually and your savings bank balance, or worse, cash in that pot, are not increasing anywhere near the inflation rate. So, effectively, this idle cash is deteriorating with time. In fact the same can be also said for investments in Fixed Deposits of banks where post tax returns are less than inflation. You must direct it to a better return generating avenue, so as to at least cover the inflation rate. If you are looking for liquidity, investing in a liquid mutual fund is a better option.

Excess gold: Indians are obsessed with gold. We buy gold on every auspicious occasion and worse, we buy gold in jewellery form and we firmly believe that it is an investment which will protect us in case of emergencies. We pay huge making charges at the time of purchase, which is a total loss. We pay locker rents for ensuring safety of our jewellery. And in case an emergency arises, selling gold jewellery is considered ominous, and is the last resort to source money. And if all we have to sell, we pay wastage charges, which is again a loss. So, buying gold jewellery is not an investment at all. If you still feel that gold offers you protection, you can possess it in dematerialised form, you can invest in gold funds or gold ETFs. This will give you the benefit of availing the increase in the price of gold, no making or wastage charges, & no handling charges. The investors who are willing to overcome these personality traits will move towards their goal of becoming wealthy sooner than those who don't.

The last day for action to save taxes is just round the corner. It is high time that you now take compute the tax liabilities and take necessary steps to reduce your tax liability. However, in this last few days, it is also very easy for you to get carried away and make some mistakes. In this piece, we will give some tips on what you should actually do along with a brief overview of the tax saving avenues...

Last minute tips:

• Calculate your taxable income first and the investments /deductions already made under different IT sections, especially section 80C.

• Don't rush into long term insurance products in a hurry. The primarily reason for buying insurance should be protection and not tax savings.

• Do not invest in NPS purely to save taxes. NPS is a long term commitment and the new taxation benefits announced will only be applicable in the new financial year.

• Invest only where you understand the product and feel a genuine need for the same.

Explore the following options to save taxes ...

1. Mutual Fund ELSS schemes: The good part is that your investment can be made easily in a product that has the shortest lock-in period of 3 years and very favourable tax benefits. The safe part is that there is no recurring investments or any sort of long term or future commitment. But one should understand that the investment will be made in equity asset class which may give volatile returns with a fair possibility of both good and not-so-good returns. It is an often recommended product by financial advisors and you should it a good look .

2. Term insurance plans: Term insurance offers high level of coverage for the lowest premiums. They are safer as the long term commitment is low and you get the maximum coverage for every rupee that you pay. However, choosing a term plan should be done with care and help of experts / insurance advisors. The process can be completed with payment of premium unless there are some medical tests required.

3. Health Insurance cover: This another popular avenue for saving taxes. Healthy young adults without any adverse medical history may still find this option available but one would need to hurry to buy the policy on time as it may take a bit of time.

Common Tax savings sections ...

Options covered under 80C / 80CCC / 80CCD