Estate Planning In 2025: Legal Updates And Trends–Why You Shouldn’t Delay For Essential Estate Planning?

The first step for someone who hasn't begun the estate planning process should be asset inventory and consolidation. A carefully thought-out estate can help prevent arguments over asset distribution and family strife. A well-planned estate will help prevent succession rules from entering the picture, which can cause your loved ones to experience delays, stress, and extra expenses. By defining how your assets should be divided after your death, estate planning helps you make sure your loved ones are taken care of. It also enables you to name guardians for young children and ensure their support. These are the main estate planning responsibilities that people and families should focus on in FY 2025-2026, according to an interview with Pranjali Agarwal, Agnam Trusteeship, and Family Office Pvt Ltd.

1. Key estate planning tasks individuals and families should prioritize in FY 2025-26

Consolidation and inventory of assets should be the priority for anyone who has not started the process of estate planning. Subsequently, a professional may be approached to discuss requirements, goals and plans. Various tools of estate planning may be considered and used depending on the family dynamics, asset holdings, jurisdictions involved and goals of the family.

At the very least, one must prepare their will and have nominations in place.

2. Common mistakes to avoid when creating or updating a will or trust

One must avoid having a handwritten will, as typed wills are entirely legible. Avoid adding ambiguous statements and impossible situations, as they can delay the execution or even make your will invalid.

Store your documents at a place that is fireproof and can be accessed by the executor/trustee. While updating the documents, make sure that there are no contradictions between the original document and the document of amendment. One can also consider replacing the original document entirely with a new one.

3. Tips for planning around digital assets, tax liabilities, and nominee designations

It may be useful to create an inventory of all your digital assets (email accounts, social media accounts, online banking accounts, devices, websites and blogs, intellectual property, etc.) and include them in your will. One may also create an inventory of login details, but be careful that only the executor gets hold of it after the demise of the testator. Designating a 'legacy contact' like Facebook allows is also helpful.

In India, there is no estate tax as of now, and hence, no tax is paid by the legal heirs on inheritance. However, while gifting assets during a lifetime, one must be aware that gifting to a non-relative above Rs. 50,000/- can attract tax liabilities. Whereas, transfer even to a non-relative through a will, irrespective of the amount, does not attract tax liabilities.
While creating a private trust, one must keep in mind that including a non-relative or even including a clause to allow inclusion of non-relatives as beneficiaries will attract tax under Section 56(2)(x) of the Income Tax Act.

Since nominees are merely trustees and not owners, one must not think that having nominees would suffice as an estate plan. It is always better to align nominations with beneficiaries in your estate plan.

4. Why estate planning is essential even for middle-income households

In India, intestate succession is governed by personal laws of succession, which are specific to religion. If there is no estate plan, then succession takes place as per the religion-specific laws and estate is divided and distributed among such beneficiaries and in such proportion as specified by the laws of that specific religion.

And this list of beneficiaries and proportion of distribution may not be aligned with the wishes of the owner. However, having an estate plan will make sure that your properties are distributed as per your wishes and not as per the law. Hence, even middle-income households can use the various tools of estate planning to avoid the reign of the religion-specific law.

5. Any new trends or legal updates to watch out for in the coming year

Taxation plays a big part in estate planning. Tax, whether paid during or post lifetime, affects the size of estate.

Recently, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held that capital gains on redemption of mutual funds held by an NRI in India fall under the residual clause of Article 13 of the India-Singapore tax treaty. Hence, they were held exempt from capital gains tax in India and liable to tax in the country of residence. NRI saved tax on short-term capital gains amounting to Rs 1.35 crore. However, this kind of precedent may cause India to lose crores of taxes, as this has a large potential for misuse.