How Parents can seamlessly transfer assets to their NRI Children
Summary
TLDRIn this episode of NRI Money Clinic, Dr. Chandra discusses the complexities of estate planning for parents with Non-Resident Indian (NRI) children who may not return to India. Expert Mr. Nikil Wagle, a Chartered Accountant and estate planning specialist, shares crucial elements of estate planning, emphasizing the importance of having a will, setting up trusts, appointing local executors, and maintaining liquidity in assets. He also highlights the need for NRI children to open NRO accounts in India and the importance of considering tax implications and legal regulations in both India and the child's country of residence.
Takeaways
- π Estate planning is crucial for parents with NRI children to ensure seamless transfer of assets according to their wishes with minimal legal and tax implications.
- π A well-drafted will is the cornerstone of any estate plan, essential for expressing how and when assets should be distributed posthumously.
- πΌ Setting up a trust can provide additional control over asset distribution, especially beneficial for substantial or complex assets and wishes.
- π€ Appointing a local executor or trustee in India is vital for managing assets and legal processes effectively, given the geographical distance of NRI children.
- π Adding NRI children as nominees to financial assets simplifies and expedites the transfer process, ensuring quick access to inherited assets.
- π¦ Encouraging NRI children to open NRO (Non-Resident Ordinary) accounts in India facilitates the easy receipt of funds from resident Indian parents.
- π§ Maintaining liquid assets like cash, bank accounts, and easily sellable investments is advisable for ease of transfer, avoiding forced selling, and providing flexibility for NRI children.
- π Liquid assets reduce legal complications associated with transferring ownership of physical assets like real estate, which can be complex and time-consuming.
- πΉ Tax implications vary by jurisdiction; inheritance itself is not taxed in India, but income and capital gains from inherited assets are taxable.
- π€ A multidisciplinary approach involving professionals like international estate planning experts, chartered accountants, and financial advisors is recommended for effective estate planning.
- π£οΈ Open communication with NRI children about estate plans is essential to prevent conflicts and ensure assets are distributed as intended.
Q & A
What is the primary concern of parents with children who are Non-Resident Indians (NRIs) and have no plans to return to India?
-The primary concern is how to seamlessly transfer their assets to their children after their lifetime, considering the legal and tax implications involved in international estate planning.
What is the role of an estate planning specialist in the context of NRI children?
-An estate planning specialist helps ensure that the parents' assets are distributed according to their wishes, without legal hurdles, and with minimum tax and legal implications, especially considering the complexities of international laws and regulations.
Why is having a will considered the foundation of any estate plan, even for NRI children?
-A will is the cornerstone of any estate plan because it outlines the distribution of assets after the individual's lifetime, which is essential for ensuring that the assets go to the intended beneficiaries.
What is the significance of setting up a trust in estate planning, especially for those with substantial assets or complex wishes?
-A trust provides more control over how and when assets are distributed, allowing for specific instructions and conditions to be set, which can be particularly useful for complex estate planning involving substantial assets.
Why is it important to have a local executor for a will or a trustee for a trust in the context of NRI children?
-A local executor or trustee is crucial for handling the legal processes more effectively due to their proximity to the assets, which simplifies the management and distribution of assets, especially considering the geographical distance of NRI children.
What is the purpose of adding NRI children as nominees for financial assets?
-Adding NRI children as nominees simplifies and expedites the transfer process of financial assets, providing them quick access to the inherited assets without the complexities of legal procedures.
Why should NRI children consider opening an NRO account in India?
-An NRO (Non-Resident Ordinary) account in India facilitates the easy receipt of funds from Resident Indian parents and simplifies the process of managing inherited assets.
What are the benefits of maintaining liquid assets in an estate plan, especially for NRI beneficiaries?
-Liquid assets like cash, bank accounts, and equity mutual funds are easier to transfer with less paperwork, avoid forced selling at unfavorable prices, provide flexibility for the NRI children to either keep invested in India or repatriate the assets, and reduce legal complications.
How does the taxation of inherited assets differ between India and other countries where NRI children reside?
-In India, inheritance itself is not taxed, but the incomes generated from the inherited assets are taxable. In contrast, some countries may impose inheritance tax, and the tax implications can vary based on the jurisdiction, requiring careful consideration of cross-border tax regulations.
What are the key takeaways from the discussion on estate planning for parents with NRI children?
-The key takeaways include starting estate planning early, prioritizing liquidity in asset allocation, keeping documents organized and accessible to NRI children, regularly reviewing and updating the estate plan, and maintaining open communication about the plans with the children.
Why is it important to involve multiple professionals in the estate planning process for NRI children?
-Involving professionals like international estate planning experts, chartered accountants familiar with international tax laws, and financial advisors ensures a comprehensive approach that covers legal, financial, and practical aspects, reducing the risk of non-compliance and ensuring the plan's effectiveness.
Outlines
π Addressing Estate Planning for NRI Children
The video script begins by addressing the growing concerns of Indian parents whose children have settled abroad permanently. It highlights the need for careful estate planning to ensure the seamless transfer of assets to their children after their lifetime. The episode features Mr. Nikil Vargis, a chartered accountant and estate planning specialist, who has extensive experience in the field. The conversation aims to provide viewers with expert advice on estate planning, particularly for parents with NRI children who do not plan to return to India.
π Key Components of Estate Planning for NRIs
The second paragraph delves into the complexities of estate planning for Non-Resident Indians (NRIs) and the importance of having a well-prepared will as the foundation of any estate plan. It also discusses the potential benefits of setting up a trust for more control over asset distribution and the necessity of having a local executor in India to manage assets. The paragraph emphasizes the importance of adding NRI children as nominees to financial assets to expedite the transfer process and suggests that they open NRO accounts in India for easier receipt of funds.
π§ The Significance of Liquid Assets in Estate Planning
In the third paragraph, the focus shifts to the advantages of maintaining liquid assets in estate planning, especially for NRI beneficiaries. Liquid assets, such as cash, bank accounts, and easily sellable investments, facilitate easier and quicker transfers with less paperwork compared to illiquid assets like real estate. The paragraph also touches on the benefits of avoiding forced sales at unfavorable prices, providing flexibility for NRI children to either continue investing in India or repatriate assets to their home country, and reducing legal complications associated with transferring ownership of physical assets.
π¦ Navigating Tax and Regulatory Considerations
The fourth paragraph discusses the tax and regulatory implications of inherited assets in India and other countries where NRIs may reside. It clarifies that in India, inheritance itself is not taxed, but any income or capital gains arising from the inherited assets will be. The paragraph also addresses the complexities of cross-border estate planning, including the need to consider the tax laws of the NRI's home country and the restrictions imposed by the Reserve Bank of India on the repatriation of inherited assets. It underscores the importance of professional guidance to navigate these complexities and avoid potential legal issues.
π The Importance of Early and Comprehensive Estate Planning
The final paragraph wraps up the discussion by stressing the importance of starting estate planning early and maintaining a balance between liquidity and asset growth. It advises keeping essential documents organized and accessible to NRI children, regularly reviewing and updating the estate plan, and maintaining open communication with children about the estate planning decisions. The paragraph concludes with a reminder that the goal of estate planning is to leave a legacy, not a burden, for the next generation.
Mindmap
Keywords
π‘Estate Planning
π‘NRI Children
π‘Liquid Assets
π‘Trust
π‘Executor
π‘Nominee
π‘NRO Account
π‘Tax Implications
π‘Inheritance Tax
π‘Double Taxation Avoidance Agreements
π‘RBI Regulations
Highlights
The importance of estate planning for parents with Non-Resident Indian (NRI) children who have settled abroad permanently.
Estate planning involves careful consideration to ensure seamless transfer of assets to NRI children after the parents' time.
The necessity of having a well-drafted will as a cornerstone of any estate plan.
The potential benefits of setting up a trust for additional control over asset distribution.
The significance of appointing a local executor or trustee in India to handle legal processes effectively.
Adding NRI children as nominees to financial assets to expedite the transfer process.
Encouraging NRI children to open NRO accounts in India for easier receipt of funds.
The advantage of maintaining liquid assets for ease of transfer, avoiding forced selling, and providing flexibility for NRI children.
The role of liquid assets in reducing legal complications and facilitating quick access to inherited wealth.
Tax implications of inherited assets in India and the importance of understanding tax laws in the NRI children's home countries.
The impact of double taxation avoidance agreements on inherited assets.
RBI regulations on repatriation of inherited assets and the limit of $1 million per financial year.
The importance of professional guidance in estate planning to avoid legal complications.
The interdisciplinary approach required for effective estate planning, involving legal, financial, and practical considerations.
The recommendation to work with international estate planning experts, chartered accountants, and financial advisors.
The advice to start estate planning early and prioritize liquidity in asset allocation.
The importance of keeping estate planning documents organized and accessible to NRI children.
The necessity of regularly reviewing and updating estate plans after major life events.
The crucial role of communication with children about estate plans to prevent future conflicts.
The overarching goal of leaving a legacy, not a burden, through proper estate planning.
Transcripts
dear viewers NRA Community is growing
there are a lot of Indian Pride students
who go abroad permanently stay abroad
they built up their carriers it creates
a situation where the parents of these
children are back home and they are
getting old and they are worried about
how our assets can be seamlessly
transferred to our children after our
time it requires careful thought it
requires careful consideration and
certain actions to make sure that this
process is PR is for in this episode I'm
going to talk to expert of the be estate
planning specialist Mr nikil Vargis
yellow this is L money clinic for you
and I'm Dr Chandra convert your
financial guide for a happy
[Music]
living NRI money Clinic no hype just the
right
advice in this expert speak section the
expert of the week today is EST planning
specialist is Mr nikil Wes Mr nikil Wes
by profession is a chartered accountant
a person with very good experience of
tickets together in working in estate
planning he has to his credit working
for audit firms like e and PWC in the
past and before he started his own
yellow a startup to democratize the bill
creation and estate planning exercise he
was working as the South India head for
a wealth management firm in India he has
done multiple episodes on our Channel
he's one of the very popular faculty
members here who makes things very
simple for those people who are looking
for services as well as Solutions in the
field of estate planning welcome to this
yet another episode Mr nikil wgas thank
you so much Dr but for having me again
in this conversation and uh would love
to have yet another interactive session
with with you and your audience nikil
let's get started estate planning is a
vast subject let's restrict this to
today for those parents whose children
are nris who have no intention of coming
back India anytime soon or maybe
permanently they'll become the NRS what
is the estate planning that needs to be
done in case of parents of those whose
children are nris so like you said
estate planning is a vast subject to
stick to the today's conversation if I
were to start from there estate planning
is essentially preparing for transfer of
your wealth and your assets after your
lifetime of course you need to also see
how to ensure that these assets are
available for you at during your thick
and thin but it's all about how it's
available for you and how can it
seamlessly transfer to your loved ones
post your life right right but when it
comes to NRI children it becomes a
little more tricky complex to uh you
know navigate because there are
international laws and regulations that
one need to deal with so from that
standpoint the goal specifically would
be to ensure your hardened assets are
distributed according to wishes that's
Point number one and more important
importantly without any legal hurdles
and minimum tax and legal implications
that's the whole objective of how to go
about with an estate planning especially
when you have NRI children estate
planning needs to be done there's no
escape from what are the key components
of this estate planning one 2 three how
would you like to Enlighten my audience
on this absolutely no there are several
you know elements crucial elements
rather uh in in the estate planning
right the first and foremost obviously
is to have a foundational document which
is nothing but a well Ed will right this
is a CornerStore of any estate plan no
matter which country you're looking at
it will becomes Basics but beyond that
if you want to consider setting up a
trust especially if you have substantial
assets or if you have complex wishes
then trust can provide a little more
control over how and when your assets
are distributed that's something which
you can look at Beyond a will but having
said that apart from Will and Trust what
you could look at is whenever you set up
a will or write your own will you should
Ensure that the executor or rather you
have a good executor to you will or a
trusty to your trust who is someone who
resides pretty much in India because
you're looking at Indian assets your
kids are abroad remote situation you
want somebody who is more nearer to the
uh assets to deal with the requirements
right therefore given the GE
geographical distance with NRI children
it becomes much more critical to handle
the legal process more effectively by
having a local executor to your will or
a truste to your trust most more
importantly it's also important that
your NRA children are added as nominees
if that's somebody who is going to get
your assets or your financial assets
wherever possible you should add them as
nominees this kind of simplifies the
entire transfer process it expedites the
entire transfer process and therefore
having your nomination aligning with
your will one makes things very clear
and give quick access to the uh NRI
children but more important because NRI
children may not many of times that I've
seen that right many of times they may
not having a bank account in India and
therefore transfer becomes a little
critical we should encourage NRI
children to open nro accounts in India
which is a non-resident you know account
ordinary accounts in India that will
further facilitate an easy received of
funds from Resident Indian parents when
the time actually comes right and last
Point here would be to keep assets more
liquid in nature uh more so because it's
easily accessible and it is in
particular much more beneficial for NRI
uh
nikil you specifically mentioned this
liquidity aspect of maintaining the
asset why it should remain liquid what's
your suggestion for the audience uh
who's watching this program how they can
make it happen this is pretty much
stemming from our experience right we
have seen you know parents with heavily
invested in illiquid assets and then
kids struggling later point of time to
gain access maintain these assets Etc so
on and so forth and therefore it's more
coming from experience that you know
having liquidity becomes extremely
crucial when it comes to estate planning
when whenever there's NRI beneficiaries
involved what are the broad benefits
that I can elaborate here one of course
ease of transfer right liquid assets
like cash and bank accounts or easily
divisable or sellable Investments like
Equity mutual funds any other Capital
Market instruments can be transferred to
ni children with much more quickly less
paperwork and when compared to physical
assets like real estate properties
commercial agricultural whatnot right it
becomes much more simpler for transfer
of assets the second point would be more
to avoid forced selling why does this
occur because if you have Estates which
mainly consist of illiquid assets Again
Properties like I said earlier it
becomes very difficult for a to kind of
gain access to it and also maintain this
for a long period of time and therefore
they tend to sell them off on
unfavorable prices and you and I know
that when you want to sell always you
are on the you know not on the good side
it's always a buyer's market right and
it becomes very difficult to sell at a
good price and therefore having liquid
assets become much more easier for
family members because you don't need to
worry about these difficulties of
maintaining these properties from a
remote jurisdiction third important fact
here would be that having liquid assets
will bring flexibility for the NRI
children how flexibility because liquid
assets give the N children options now
whether you want to keep yourself
invested in India rather continue with
India growth story or if you think no
I'm not interested I can't understand
the requirement in India they can easily
repatriate these uh assets back to their
home residents or resident country and
uh meet their financial needs in their
prevailing economic conditions in those
countries right and that way it becomes
much more flexible for family and the
fourth Point here would be reduce legal
complications for the kids how
transferring ownership of physical
assets like I said earlier becomes very
complex including lot of paperwork
physical presence and whatnot but liquid
assets are generally tend to involve
very less processes and the whole
process of transfer is much more simpler
as compared to physical assets estate
planning itself is pretty complex in a
large different areas itself one problem
that comes during the estate planning is
today you have nris in almost all
countries a large chunk of them are in
developed countries like us UK Canada
Singapore Australia the taxation of
inheritance in India and in these
countries are different is there
anything that people can do keeping this
taxation of inherited Assets in the
respective countries for these NRA
children what can be thought about in
this line of course yeah you you rightly
said you know the tax complications
legal framework regulatory framework
exchange control framework these are
things that impact when it comes to
again you know multi-jurisdictional
situations are involved right like you
said inate planning itself is complex
planning for this becomes very crucial
technically speaking from an India
standpoint inheritance itself is not
taxed right if you receive any asset be
it from relative non- relative no tax
implications are arising your way if you
were to receive it by way of inheritance
at least this as per the current law
right but once you receive these assets
incomes generated from there on will of
course be taxable including capital
gains will go back to cost of previous
owner what do I mean here is for
instance say if I received certain
assets by way of inheritance I don't see
the value of that asset as on the date
of I received the inheritance but at
what price the actual owner purchased it
therefore tomorrow when I sell it that
becomes the cost basis whatever the sale
price less that cost is what I'll bake
capital gains and that's how India taxes
however the same implications in
offshore jurisdictions in their home
countries needs to be looked at because
there the tax implication could be
different typically speaking receiving
amounts by way of inheritance baring few
countries there is no tax per se unless
you received it from a resident of that
particular jurisdiction whatever I mean
here is that if I as a Indian resident
were to pass on my assets to my kids say
is a US czen there is no inheritance tax
but if I'm a US citizen and these assets
gets passed on to my children who are
also whether US non- US citizen then
there could be potential inheritance tax
whether the asset in is in us or it is
in India it doesn't matter all your
Global assets are exposed so that's
something which we need to look at but
like I said from a tax perspective
broadly if you look at it any incomes
arising will be taxable in the hands of
uh in the India and if they are if those
incomes are also taxable in offshore
jurisdiction then that's one we need
need to look at from which jurisdiction
that we talking about typically the tax
paid in India is available as a credit
for those incomes which are arising in
India in your home country as well now
that's where the double taxation
avoidance agreements Etc comes in place
very fact specific scenarios each
country is needs to be evaluated on a
case- toase basis but more importantly
if you go beyond tax there is also RBI
regulations or exchange control
regulations that is relevant from an
India context wherein RBI restricts
amount of assets that can be repatriated
which are which you have inherited from
your parents as NRI children it becomes
very critical because even though you
have inherited say large chunk of money
RBI only permits you to take $1 million
us per Financial year out of these
inertive assets and for that also
there's good amount of proper procedures
that one need to follow before these
assets can be pulled up aspects like
having a nro account Etc really helps in
having these proceeds receiv received
but the point being that these are
aspects that one need to look at
sometimes even parents you know while
you have NRI children parents in India
also think how do I send money to us or
to any offshore jurisdiction there also
there are restrictions in terms of
parents being able to gift only up to
say
$250,000 as gift per year per individual
right and that's something these are
implications that one need to keep in
mind when we look at from a crossborder
tax and Regulatory scenario nikil these
are the days of do it to yourself
investors do it to yourself Z from the
kind of complexities you spoke around
the estate planning for me it appears is
that it is not possible for anyone to do
it your also I get a feeling that
probably it is a multidisiplinary
approach and probably somebody has to
specialize into estate planning you have
is in this line for more than 15 years
now if somebody wants to do an estate
planning and take the right decision
which are the professionals who need to
be involved in it and how one can ensure
that they take the right decision and
leave no Gap in the restate plan what
the procedure to go about you're
absolutely right no it is actually uh
pretty complex and few things can be
done DIY not everything right when it
comes to regulations Etc it's always
best to take professional guidance as it
because you don't want to be uh you know
be in the wrong side of the law because
you may end up doing things saying it's
obvious why should there be an issue but
end of the day you don't want notices
coming from tax and needes with respect
to you not complying with the required
regulations right so therefore like you
rightly said I'd strongly recommend
working with profession especially on
crossb scenarios now if I look at who
are the kind of professionals that you
need to deal with obviously from an
estate planning perspective you need to
deal with certain expert specializing
International estate planning because
now the person needs to know because
you're looking at parents in one
jurisdiction children in other
jurisdiction you need to have a flare of
how the jurisdictional complexities work
and therefore you know working with an
expert having experience in
international estate planning will be
very crucial second kind of professional
that you need to probably deal with is
chart accountant who are familiar with
both Indian and international tax laws
right again at least if they don't
undertake the compliance they can at
least guide you saying what needs to be
done so that you at least know better
perspective than doing things on your
own because there a high possibility
that if you don't know these things you
may go on the wrong side of the law and
then being non-compliant and the last
thing could be to have very good
financial adviser along with you who can
you know there's more for parents in
India who can give you the right
investment strategy depending on your
requirements objectives to keep one have
assets that are multiplying but also
meeting the liquidity uh needs of your
family so that end of the day it's not
you do these things in Silo all these
needs to come along together and then
that's how a effective Financial or
estate plan for a family kind of happens
right that's how you look at as a
comprehensive estate plan for a family
taking to aspects Legal Financial and
more importantly practical aspects which
makes things much more robust for you n
the idea of this episode is to draw the
attention of our viewers to do the
estate planning well ahead of time and
in a right way before I let you go can
you take us through a synopsis or a
summary of what you said for the
audience because I know it's a complex
subject one two three four things what
audience have to keep in mind absolutely
I would say the quick takeaways from
this would be that start planning early
very important estate planning is not
something that you leave until the last
minute it's something that you should
I've done as of yesterday two could be
prioritize liquidity in your asset
allocation like I said earlier but
maintain a balanced portfolio for
yourself right that's important to meet
your objectives but having liquidity as
a priority becomes important more so
from the ease of access for your
children third could be keep your
documents organized ensure these
information about those documents are
available with your NRI children so that
they know where to find when the time
comes fourth could be regularly review
and update your estate plan especially
after major life changing events changes
in your family changes in your asset
scenario then you should look at
updating typically what I advise my
clients is that at least once in a year
look at your do estate planning
documents could be a will trust what not
if nothing needs to be done great at
least you have peace of mind if not it's
time that you go back and update your
and the fifth aspect would be
communication communication is extremely
crucial when it comes to anything that
we're talking about here discuss your
plans very openly with your children if
possible because lastly it surprises is
what results in one loss of assets and
more importantly conflicts between
siblings at a later point in time why do
you want to get there if you have the
opportunity to have a conversation have
that open conversation if not at least
somebody should know about the existence
of the estate plan the last thing that
you want is that you do all of this and
family has no clue about what you have
done and they assume that there's
nothing is been done and start as if
there's no estate plan in place right
the important Point here like a final
takeaway from my end would be that the
important aspect here would be that for
you for everybody here is that the goal
is to leave a legacy and not a burden
for your children right with a proper
planning you can ensure your hardened
assets are benefiting your NRI children
as you in you know intended it right and
it should not be a burden tomorrow that
after you're gone your children blaming
you saying why was there such a mess
that I have to deal with now right with
that note I think that' be a good way to
kind of take away for the audience here
in terms of why this is extremely
crucial because if your assets are not
going to the intented person in a smooth
fashion it is always going to be a
burden for your children and therefore
planning early becomes extremely good sh
nikil thank you very much for all these
thoughts and enlightening my audience on
the need of this estate planning I keep
calling you again and again we look for
Solutions people are searching for and
uh thank you very much for your kindness
to come on my show share all these
inputs for the benefit of our audience I
remain in gratitude to you for your
kindness thank you very much sir thank
you so much Dr but to again invite me
and have this conversation with you and
your audience I know there's a we have
kind of touched upon the surface we
can't get into Integrity then you need
to speak for hours around this right but
that said you know if there are any
specific requirement obviously your
audience can reach out to you and you
know the right advice can be given but
that said thank you so much for having
me on board look forward to having many
more many more such conversations with
you and your audience thank you so much
dear viewers hope the video I've done
today with the expert of the week Mr
nikil watus gave you the reason why you
should be looking at estate planning as
early as possible for smooth transfer of
these assets which are held by you to
your NRI children if it did give you the
right direction please do give me a
thumbs up for those of you who are at to
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