Saving Tax For Your Successor By MoneyMindz.com

By | 06/02/2019

           

Saving Tax For Your Successor By MoneyMindz.com

       Smart Estate Planning help you save a lot of tax for your successors resulting in better money management.Free Financial Assistance Advisory Portal, MoneyMindz guides you in tax-planning helping you live a carefree life.

No clubbing

During your lifetime creating separate tax files in the names of different family members may not be possible as it may attract income tax clubbing provisions. Distributing your wealth or estate after your passing away can be a tax-efficient proposition for your heirs. For example, creating a fixed deposit in your grandchildren’s name will not reduce your tax-liability. Whatever interest that fixed deposit generates will be clubbed with your income and taxed as per your income tax slab. If your grandchildren receive such fixed deposits as inheritance through your will, then the interest income will be treated as your grandchildren’s income. No clubbing with anyone else’s income will be made.

Another example will be if you gift money to your daughter-in-law or your spouse during lifetime and if they invest this money and earn returns, the income generated out of these investments will be clubbed in your income and taxed accordingly. If they receive this money through a will, then this is counted as their personal wealth. Bequeathing your entire estate to a single person — be it your son or spouse — the entire wealth will go into their personal estate. The complete tax liability on the returns generated from that wealth falls on that single person.

HUFs and private trusts

Creating a Hindu Undivided Family (HUF) or private trust through your will and bequeath your assets to these entities can be made. These will basically be treated as separate tax entities. HUF tax calculations would be similar to an individual and thus, it can also take advantage of basic exemption limits and tax deductions available to all taxpayers. Usually HUF is used to take care of joint family property. A private trust can be formed when you don’t have confidence in the calibre of your successors.

For instance, if you want to bequeath to your wife but are not sure that if she would be able to manage the finances well and also wants to protect her future. In that case, you can either form a private trust in your life time or through a will.

You can either trust your wife or some trustworthy person as trustees in order to manage the wealth and support your family in accordance with the conditions laid down in the trust deed. You can bequeath the amount to the trust. Well a private trust is a legally-accepted entity with the tax structure of an individual.

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