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3 legal instruments for asset transfer to heirs: Will, gift deed, family trust fund compared

Jan 03, 2022, 10:58:11 AM IST

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Tools of estate planning

Just as in the case of financial planning, so in estate planning, you cannot take the 'one size fits all' approach. Each family is unique with different mindsets and a distinct mix of assets and liabilities. This is exactly why you must be aware of special tools of succession besides a will and evaluate each method of transferring one's assets before/after one's death.

Here, we look at transferring assets to legal heirs via 3 routes, namely a will, a gift deed and a private family trust. Given below are the pros and cons of each route, as well as the charges and taxes you will incur.

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Will vs Gift Deed vs Private Family Trust

Will: It is a legal document that names individual(s) who would receive the property and possessions of the will-maker after his/her death. The document can be revoked, modified, or substituted by the person making it at any point during his/her lifetime.
Gift deed: This legal document records the act of giving a gift and is created by the donor (the person giving the gift) and given to the done (person receiving the gift) along with the gift.
Private family trust: This tool allows the creator of the trust to have complete control over it and freedom to pass on the assets to the beneficiaries, who can be stated in the Trust Deed by the creator/author.

Also read: All you need to know about estate planning, inheritance, will and more

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Transfer of assets

Will: After death of individual
Gift deed: During lifetime of individual
Trust fund: During Lifetime or after death depending on wish of individual

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Ease of creation

Will: Can be handwritten; amendable any number of times
Gift deed: Requires gift deed; Owner loses right to the asset during his/her lifetime
Trust fund: Requires trust deed to transfer assets from owner-individual to trust

Also read: 9 estate planning steps to transfer assets to heirs

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Control over assets

Will: Control is retained if assets are passed via will
Gift deed: Owner loses control over the asset once gifted
Trust fund: Owner has an option to retain control

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Costs

Will: One-time cost of making a will unless amendments are made in future
Gift deed: Stamp duty is payable
Trust fund: Apart from stamp duty, there might be sundry expenses such as payment of salaries to trustees etc.

Also read: 5 common doubts about writing a will resolved

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Income tax implications

Will: No taxes will be payable by the legal heirs at the time of receiving the assets
Gift deed: Gifts to specified relatives are tax-exempt.
Trust fund: Tax-exempt depending on satisfying various conditions under the Income-tax Act.

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