Praveen Saanker

Selling your business ? First get your asset protection plan right..

Kapur, a successful software developer, was selling his business for several million dollars. As is common in such sales, he had to make representations and warranties about the quality of the software. As is also common (more than 45% of the time), the buyer ended up suing the seller for breach of warranty.

Knowing that this was a possibility, Kapur put the proceeds of the sale into an asset protection trust. A year later, when the suit came, his assets were out of the reach of the creditor.

Bottom line

Simple…Anybody selling a business should have an asset protection plan.

Protecting Business Owners Against Liability

Mr & Mrs Kapadia are settled in California with strong roots in India and each own shares in a building-supply company with Mr.Kapadia owning 75% of the stock and Mrs. Kapadia owning 25%. Years ago, they had been told that doing business in corporate form affords the owners a certain degree of asset protection. The problem: that is true if the lawsuit arises out of the operation of the business. But it isn't true if the lawsuit is aimed at Bill or Don personally.

Mr. Kapadia was involved in a minor automobile accident when he was in NJ. He was surprised when we informed him that if the plaintiff obtained a judgment against him, nothing would prevent the plaintiff from obtaining his stock in the company making him the controlling shareholder.

The solution? We coordinated with our Estate Planning Partners in California and converted the company from a corporation to a limited liability company. The result is that there are no shares for the creditor to attach and no possibility of a creditor of one of the owners to seize the assets of the business or otherwise get involved in its operations. Unlike corporate stock, interests in LLCs are protected from claims of creditors in virtually every state

Asset Protection – Case study

 

The company is a successful Delhi based home builder. Over the past few years, following many construction defect lawsuits, the firm found it more and more difficult to carry liability insurance. Coverage was just too expensive. Eventually, the decision was made to stop carrying insurance coverage altogether.

Without insurance coverage, the company-and possibly its owners-were exposed to future lawsuits. Asset protection for the company and its owners was the best alternative to insurance coverage.

The company's operations had to be restructured so that the liability arising out of any one building project would reach only a limited amount of the company's assets, if any. A separate legal entity was established for each construction project. Their protection was enhanced further by having different entities own the real estate and do the developments work.

An additional layer of entities further insulated the individual owners from the liabilities of the business. The ownership of the personal assets of the owners was further restructured.

In its first test, this protective structuring worked as planned-seeing the level of protection it faced, the plaintiff dropped a potential class action lawsuit and accepted a surprisingly low settlement offer.

RBI's FY12 monetary policy

1. RBI raises short term LAF rates and savings bank rate by 50bp
2. Operating procedure changed, a new borrowing facility (MSF) at 100bp higher than repo
3. FY12 growth seen at 8% while Mar-12 inflation at 6% with upward bias
4. Expect 50bp+ increase in the entire interest rate structure and further 50bp hike in policy rates in 1HFY11
5. Expect savings deposit rate hike to be passed on
6. Tighter provisioning norms to have marginal impact as banks are carrying excess provisions

Acquisition and Transfer of Immovable Property in India by a person resident outside India (RBI Circular as on April 8th 2011)

Introduction

Acquisition of immovable property in India by persons resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in the Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time. Section 2 (v) and Section 2 (w) of FEMA, 1999 defines `person resident in India' and a `person resident outside India', respectively. Person resident outside India is categorized as Non- Resident Indian (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. The Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.s

A person resident in India who is not a citizen of India is also covered by the relevant Notifications.  

2.   In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.

3.   The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open a Branch or Project Office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. Such dispensation is however not available to entities which are permitted to open liaison offices in India.

4.    The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India.

In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the provisions of Section 2(v) of FEMA 1999. The Press Release dated February 1, 2009 issued by Government of India in this regard is enclosed as Annex.

Note: Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease not exceeding five years) without the prior permission of the Reserve Bank.

5.  NRIs/ PIOs are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with applicable tax requirements. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.

6. The FAQs cover the following topics :

A. Acquisition of Immovable Property in India by a person resident outside India, i.e., by a NRI / PIO / foreign national of non-Indian origin by way of purchase / gift / inheritance.

B. Transfer of immovable property in India by a person resident outside India by way of

     i) sale
     ii) gift
     iii) mortgage

C. Mode of payment for purchase of immovable property in India.

D. Repatriation of sale proceeds of residential / commercial property, in India, outside India acquired by NRI / PIO by way of

     i)  purchased
     ii) gift
     iii) inheritance

E. Provisions for Foreign Embassies / Diplomats / Consulates General

F. Other Aspects.

---

A.   Acquisition of Immovable Property in India through
purchase / gift/ inheritance

Q.1.  Who can purchase immovable property in India?

Ans. Under the general permission available, the following categories can purchase immovable property in India:

i) Non-Resident Indian (NRI)¹
ii)  Person of Indian Origin (PIO)²
 
The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India.

Q.2.  Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?

Ans. No.

Q.3.  Are any documents required to be filed with the Reserve Bank after the purchase?

Ans. No.  An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.

Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission?

Ans. There are no restrictions on the number of residential / commercial properties that can be purchased.

Q.5. Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?

Ans. No.

Q.6. Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

Ans. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. However, he / she can acquire or transfer immovable property in India, on lease, not exceeding five years. In such cases, there is no requirement of taking any permission of /or reporting to the Reserve Bank.

Q.7. Can a foreign national who is a person resident in India purchase immovable property in India?

Ans.  Yes, a foreign national who is a ‘person resident in India’ within the meaning of Section 2(v) of FEMA, 1999 can purchaseimmovable property in India,but the person concerned would have to obtain the approvals and fulfil the requirements, if any, prescribed by other authorities, such as, the State Government concerned, etc. The onus to prove his/her residential status is on the individual as per the extant FEMA provisions, if required by any authority. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank.

Q.8. Can the branch / liaison office of a foreign company purchase immovable property in India?

Ans. A foreign company which has established a Branch Office or other place of business in India, in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. A declaration in form IPI should be filed with the Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for the purpose of borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank. Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan and who have set up Branch Offices in India and would require prior approval of the Reserve Bank.

However, if the foreign company has established a Liaison Office in India, it cannot acquire immovable property. In such cases, Liaison Offices can acquire property by way of lease not exceeding 5 years.

Q.9. Can a NRI/PIO acquire immovable property in India by way of gift? Can a foreign national acquire immovable property in India by way of gift?

Ans. (a)  Yes, NRIs and  PIOs can freely acquire immovable property by way of gift either from

i) a person resident in India; or
ii) an NRI;  or
iii) a PIO.

However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.

(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

Q.10. Can a non-resident inherit immovable property in India?

Ans. Yes, a person resident outside India i.e. i) an NRI; ii) a PIO;  and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek prior approval of the Reserve Bank for inheriting immovable property in India.

Q.11. From whom can a non-resident person inherit immovable property?

Ans.  A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

(a) a person resident in India
(b) a person resident outside India

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property.

B. Transfer of immovable property in India

(i) Transfer by way of sale

Q.12. Can an NRI/ PIO/foreign national sell his residential / commercial property?

Ans. (a)  NRI can sell property in India to

i)   a person resident in India; or
ii)  an NRI; or
iii) a PIO.

(b) PIO can sell property in India to

i)   a person resident in India; or
ii)   an NRI; or
iii)  a PIO –  with the  prior approval of the Reserve Bank

(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to

i)  a person resident in India
ii) an NRI
iii) a PIO

Q.13. Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?

Ans. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

(b)  Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.

(ii) Transfer by way of gift

Q.14. Can a non-resident gift his residential / commercial property?

Ans.  Yes.
(a) NRI / PIO may gift residential / commercial property to –
(i) person resident in India or
(ii) an NRI or
(iii) PIO.

(b)  A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.

Q.15. Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?

Ans.  (a) NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India.

(b) A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India.

(iii) Transfer through mortgage

Q.16. Can residential / commercial property be mortgaged by NRI/ PIO?

Ans. i) NRI / PIO can mortgage a residential / commercial property to:

(a) an Authorised Dealer / the housing finance institution in India without the approval of Reserve Bank

(b) a bank abroad, with the prior approval of the Reserve Bank.

ii) A foreign national of non-Indian origin can mortgage a residential / commercial property only with prior approval of the Reserve Bank.

iii) A foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an Authorised Dealer in India.

C.   Mode of payment for purchase of immovable property in India.

Q.17. How can an NRI / PIO make payment for purchase of residential / commercial property in India?

Ans.  Payment can be made by NRI / PIO out of:

(a) funds remitted to India through normal banking channels or
(b) funds held in NRE / FCNR (B) / NRO account  maintained in India

No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above.

Q.18 Is repatriation of application money for booking of flat / payment made to the builder by NRI/ PIO allowed when the flat or plot is not allotted or the booking / contract is cancelled?

Ans. The Authorised Dealers can allow NRIs / PIOs to creditrefund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of residential, commercial property, together with interest, if any, net of income tax payable thereon, to NRE/FCNR account, provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the Authorised Dealer is satisfied about the genuineness of the transaction.

Q.19.  Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account? How the loan can be repaid?

Ans. Yes, such loans are permitted subject to the terms and conditions laid down in Schedules 1 and 2 to the Notification No. FEMA 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time. Banks cannot grant fresh loans or renew existing loans in excess of Rs. 100 lakhs against NRE and FCNR (B) deposits, either to the depositors or to third parties. The banks should also not undertake artificial slicing of the loan amount to circumvent the ceiling of Rs. 100 lakh.

Such loans can be repaid in the following manner :

(a) by way of inward remittance through normal banking channel or
(b) by debit to the NRE / FCNR (B) / NRO account of the NRI/ PIO or
(c) out of rental income from such property
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the  borrower's loan account.

Q.20. Can NRI / PIO, avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?

Ans. Yes, NRI/PIO can avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution subject to certain terms and conditions laid down in Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time. Authorised Dealers/ Housing Finance Institutions can also lend to the NRIs/ PIOs for the purpose of repairs/renovation/ improvement of residential accommodation owned by them in India. Such a loan can be repaid (a) by way of inward remittance through normal banking channel or (b) by debit to the NRE / FCNR (B) / NRO account of the NRI / PIO or (c) out of rental income from such property; or (d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Q.21. Can NRI/PIO avail of housing loan in Rupees from his employer in India?

Ans. Yes, subject to certain terms and conditions given in Regulation 8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003, i.e.,

(i) The loan shall be granted only for personal purposes including purchase of housing property in India;

(ii) The loan shall be granted in accordance with the lender’s Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India;

(iii) The lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No.FEMA.4/2000-RB dated May 3, 2000.

(iv) The lender shall credit the loan amount to the borrower’s NRO account in India or shall ensure credit to such account by specific indication on the payment instrument;

(v) The loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR Account of the borrower and the lender shall not accept repayment by any other means.

D. Repatriation of sale proceeds of residential / commercial property
purchased by NRI / PIO

Q.22. Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?

Ans.  
(a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;

(ii) the amount to be repatriated does not exceed:

• the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
• the amount paid  out of funds held in Foreign Currency Non-Resident Account,  or
• the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and

(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.

(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.

NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance.  Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

(c) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act³ ,  or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.

Q.23. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?

Ans. Please refer to the answer at Q.22 above. NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.

Q.24. If a Rupee loan was taken by the NRI/ PIO from an Authorised Dealer or a Housing Finance Institution for purchase of residential property can the NRI / PIO repatriate the sale proceeds of such property?

Ans. Yes, Authorised Dealers have been authorised to allow repatriation of sale proceeds of residential accommodation purchased by NRIs/ PIOs out of funds raised by them by way of loans from the authorised dealers/ housing finance institutions to the extent such loan/s repaid by them are out of the foreign inward remittances received through normal banking channel or by debit to their NRE/FCNR accounts. The balance amount, if any, can be credited to their NRO account and the NRI/PIO may repatriate up to USD one million per financial year (April-March) subject to payment of applicable taxes from their NRO account balances which would also include the sale proceeds of the immovable property.

Q.25. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property?

Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.  

Q.26. If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?

Ans. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to the following conditions:

(i) The amount should not exceed USD one million, per financial year (ii) This is subject to production of documentary evidence in support of acquisition / inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.4/2009 dated June 29, 2009 (iii) In cases of deed of settlement made by either of his parents or a close relative (as defined in section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler (iv) the original deed of settlement and  a tax clearance / No Objection Certificate from the Income-Tax Authority should be produced  for the remittance  (v) Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer (vi) In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior approval of the Reserve Bank. The foreign national has to approach the Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate mentioned above.

The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of the Reserve Bank.

As FEMA, 1999 specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan. Therefore, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.   

E. Provisions for Foreign Embassies / Diplomats / Consulates General

Q.27. Can Foreign Embassies / Diplomats / Consulates General purchase / sell immovable property in India?

Ans. In terms of Regulation 5A of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000, Foreign Embassies/  Diplomats/ Consulates General, may purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided –

(i) Clearance from the Government of India, Ministry of External Affairs has been obtained for such purchase/sale; and

(ii) The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through the normal banking channels.

F. Other Aspects

Q.28. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?

Ans. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

Q.29. Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO?

Ans. Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO.

Q. 30. In which account can the sale proceeds of such immovable property be credited ?

Ans. The sale proceeds may be credited to NRO account of the NRI /PIO.

Q.31. Can the sale proceeds of the immovable property referred to in Q.No. 29 be remitted abroad ?

Ans. Yes, From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.  

Q.32. Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of the Reserve Bank continue to hold the same?  Can they transfer such property?

Ans. Yes, they may continue to hold the immovable property under holding license obtained from the Reserve Bank. However, they can transfer the property only with the prior approval of the Reserve Bank.

Q.33. Is a resident in India governed by the provisions of the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000?

Ans. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, as amended from time to time, i.e. she/he would require prior approval of the Reserve Bank for acquisition and transfer of immovable property in India even though she/he is resident in India. Such requests are considered by the Reserve Bank in consultation with the Government in India.

The citizens of countries other than those listed above can be PIOs who are covered under the general permission (please refer to Q.No.1). The provisions relating to foreign national of non-Indian origin are covered in detail in Q Nos. 6 and 7.

Categories:

Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management,  private banks, about wealth management, fund management, investment companies, financial advisor, asset management company,  banking management,  asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company,Wealth management, investments in India, taxes in india, direct investment in india,Investment in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india,  foreign company in india, the family office,  what is family office, capital investors,  investment in assets,  fdi investments in india, portfolio investments,  investments in property, Praveen Saanker, Praveen saanker, Praveen

 

Fate can be Fatal, but proper planning can still save you...Asset Protection Case Study

Gaurav was a fairly wealthy man. He had three beautiful adult children, all of whom were married to great partners. He himself had been married to the same women for 35 years. At the age of 57, Rupali, his still young and beautiful wife, had a car accident that disfigured her face so badly that even plastic surgery did very little to restore her once beautiful countenance.

Gaurav and Rupali  were accustomed to a life that included socializing with what I call "the beautiful people." Some of Rupali’s friends were starlets and quite notable individuals. With the disfigurement resulting from the accident, she never seemed to feel comfortable in the same circles. Ruplai went into a deep depression over this and her Dr. put her on prescription medications for anxiety.

Unfortunately, her withdrawal from the social circles left her home with her feelings and she started turning to alcohol and eventually narcotics as an escape. She started herself in a cycle of being up and down, depending on how much of what substance she had in her. The only time she ventured out of the home was to make a trip to the drive-thru liquor store or to see her "dealer." This was devastating to Gaurav. He couldn't comfort her and she was spinning out of control.

Soon came another car accident - Rupali was inebriated, at fault, and she caused injuries to the other parties. With a DUIA charge under her belt, Gaurav, fearing that the worst was yet to come, set up an asset protection plan making their three children equal beneficiaries.

About eight months passed, Rupali had sought help for her substance abuse and was attending meetings and had been sober for almost six months. Even though her license had been suspended due to accident number two, she still drove to her meetings occasionally, whenever Gaurav or a friend couldn't drive her.

She still struggled with depression but was making what "seemed" like progress. Until one night on her way to a meeting, she decided instead to stop and get a single wine cooler. Tragically, this led to a four-hour relapse and ended in a third automobile accident and the bills soared, as well as the legal fees for her defense and the lawsuits from the victims and their insurance companies.

This story doesn't get any better.

Three months later, Gaurav left town on a business trip and Rupali, so deep in her guilt, shame, depression and loneliness, spent the next four days on a cocaine binge which ended in a cardiac arrest. Gaurav returned from his trip to find his once lovely wife sprawled out on the floor, drugs and paraphernalia scattered about their home.

Suspecting foul play, Gaurav immediately called the paramedics…but it was far too late. Once they pronounced Rupali dead, Gaurav called his oldest son to break the news. The next five hours or so must have been very difficult with the police swarming his home gathering evidence.

Sixteen hours later, when the first of his three children arrived at the house, Gaurav was also dead…his son found him in his study…with an empty bottle of his wife's prescription Klonopin, a half bottle of Kelt Petra "Tour du Monde" on the table in front of him and in his lap…a picture of him and Rupali on their 25th wedding anniversary trip.

This story made the local news and the media had a heyday with it… but none of the judgment creditors were able to access any of Gaurav’s wealth, nobody except his children, because he had set up an ironclad asset protection plan.

Summarising..
This is a story that is so tragic that it's hard to say there were any winners. This story does show the frailty and unpredictability of life. The ONLY positive thing here is that the children weren't further tortured by a long and arduous probate period or watching their parents estate be gobbled up by greedy litigants. The painful loss of both parents was excruciating enough for them.

 

Categories

Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management,  private banks, about wealth management, fund management, investment companies, financial advisor, asset management company,  banking management,  asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company,Wealth management, investments in India, taxes in india, direct investment in india,Investment in business, investment in companies, wealth in india, financial advisors, direct investments, portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india,  foreign company in india, the family office,  what is family office, capital investors,  investment in assets,  fdi investments in india, portfolio investments,  investments in property, Praveen Saanker, Praveen

 

What investment options are available to NRI's for their repatriable corpus? How can we be of value to you..

 

• Non Resident Indians can invest in Government Securities and Treasury Bills through a Primary Dealer. The same will be issued to Non Resident Indians in a dematerialized form, and Non Resident Indians have to establish to the primary dealer that the source of funds is external in order to allow Non Resident Indians to put the proceeds on maturity into an NRE account.
• Non Resident Indians can purchase and redeem units of domestic Mutual Funds, by simply mentioning Non Resident Indians status as NRI in purchase form, and by issuing a cheque from Non Resident Indians NRE account. However, if Non Resident Indians invest in the Money Market Mutual Fund, they will not be permitted to repatriate proceeds of redemption.
• Non Resident Indians are also permitted to invest in Bonds issued by public sector undertakings (PSUs) in India from Non Resident Indians NRE account and credit the proceeds back into the NRE account.
• Non Resident Indians can purchase Shares, both in the Primary as well as the secondary market.
  
  Primary Market
  
  In the primary market, Non Resident Indians may invest either through an Initial Public Offer (IPO) of Public Limited companies, or in Public Sector Enterprises being dis-invested by the Government of India. This will be mentioned in the prospectus/application form and the company will have taken the approval to invite Non-resident funds.
  
  Secondary Markets / On a stock exchange
  
  Non Resident Indians are permitted to trade in shares listed on the Stock exchange under what is called the Portfolio Investment Scheme (PIS). Non Resident Indians will simply have to open a separate NRE savings and an NRE Demat account and obtain a permission (through us) to do so. We will guide and assist Non Resident Indians with the formalities.
• Non Resident Indians are also entitled to place Non Resident Indians money in Deposits with Indian companies, non-banking finance companies registered with RBI, housing finance companies and other financial institutions. The company will have taken the permission for RBI to allow Non Resident Indians to invest, and will then make an appropriate mention / invitation to Non Resident Indians.

What does it take to build a Wealth Advisory Business..

Hi Fellow Advisors,

Building a world class wealth  advisory practice is'nt complicated but it takes a lot of strategizing, using the right techniques.. relentlessly, every step of the way..Appended below is what you could call a direction map. We could debate and elaborate on each of the points.

1. Identify your natural niche market and have a plan of action on how to focus on it
   
2. Get at least 8 appointments a week early in your career by using the right methods to target and contact potential clients
   
3. Make the most of every appointment by going in with a clear plan and identifying specific objectives
   
4. Turn prospects into clients systematically winning them over with proven methods and strategies
   
5. Employ a practical wealth-management process to continuously build on your growing assets
   
6. Significantly increase the number of new affluent households that you bring into your practice
   
7. Use powerful time-management techniques to stay organised and complete the daily activities required to gain momentum and build your practice 

Can I repatriate money from the Sale Proceeds of my Immovable Property? FAQ by NRI's

There are fairly liberal provisions relating to remitting overseas, proceeds arising from sale of properties in India. These provisions can be considered under three categories:

• Property acquired by the Non Resident after becoming a non-resident and out of either remittances from abroad or from NRE and FCNR deposits held with banks. The extent of remittance is restricted to the amount of repatriable funds used to acquire the property. Further the facility is restricted to two properties.
  
  The documents required to be produced are:
  • Account holder's Letter giving details of purpose of remittance and certifying the same
  • Copies of sale deeds or other property ownership document evidencing the acquisition and sales consideration
  • Evidence that the acquisition was from repatriable sources (inward remittance certificate and/or certificate that the payment was made from NRE/FCNR deposits)
  • Cheque or debit authority if the same is not contained in the letter in item (i)
  • Application in Form A2
  • Chartered accountant's certificate in the format prescribed by IT authorities
• Sale proceeds of immovable properties held by NRIs/PIOs can be remitted along with other remittances allowed out of NRO accounts mentioned earlier in the note subject to a value ceiling of USD 1,000,000 per financial year (April-March)
  
  The documents required to be produced are:
  • Account holder's Letter giving details of purpose of remittance and certifying the same
  • Copies of sale deeds or other property ownership document evidencing the holding of the property for ten years and the sale consideration
  • Cheque or debit authority if the same is not contained in the letter in item (i)
  • Application in Form A2
  • Chartered accountant's certificate in the format prescribed by IT authorities
• Property acquired by inheritance as an NRI can be remitted along with other remittances allowed out of NRO accounts mentioned earlier in the note Requirements subject to a value ceiling of USD 1,000,000 per financial year (April-March): The documents required to be produced are
  • Account holder's Letter giving details of purpose of remittance and certifying the same
  • Copy of document/s establishing the inheritance and sale proceeds of property credited to the NRO account
  • Cheque or debit authority if the same is not contained in the letter in item (i)
  • Application in Form A2

 

Categories:

Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management,  private banks, about wealth management, fund management, investment companies, financial advisor, asset management company,  banking management,  asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company,Wealth management, investments in India, taxes in india, direct investment in india,Investment in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india,  foreign company in india, the family office,  what is family office, capital investors,  investment in assets,  fdi investments in india, portfolio investments,  investments in property, Praveen Saanker, Praveen saanker, Praveen

 

Home Loan Dilema..Swtiching Banks for lower interest rates

 

In the recent times most public sector banks have reduced interest rates on home loans. In the last couple of months, the Reserve Bank of India (RBI) has reduced the cash reserve ratio (CRR), repo rate, and reverse repo rate resulting in a great relief to the loan borrowers as interest rates have eased a bit. Many home loan borrowers are considering changing their lenders to make the best of this opportunity. However, this switchover exercise is not simple. You need to weigh the pros and cons in terms of savings on interest and the extra costs payable. There are costs associated with transferring the present loan to another lender. The new bank would be charging processing fees for the loan. Generally, it is in the range of 0.50 to one percent of the total loan amount. You may also incur expenses of stamp duty and on documents like a no objection certificate for your new loan. Also, there would be a prepayment penalty which is one of the principal costs associated with balance transfer of a home loan. This may range between one and two percent of your total loan amount due, charged by your present lender. It would be advisable to switch to another lender only if you are getting at least a 1.5-2 percent reduction in your current interest rate, taking into account the tenure of the loan. Switching to a new lender is however not advisable if you are getting only a half percent reduction in the existing interest rate, as the EMIs would be only marginally lower. You will have to bear a prepayment penalty of around two percent and processing fee of the new lender. So, the total amount due could end up higher than what you are paying to your existing lender after taking into account the substantial interest component which you have already paid to him. It does make sense to switch your home loan from one lender to another if the rate is lower, but the difference should be higher than the foreclosure charges that you may have to pay. In case the new lender is offering a lower interest rate, either your EMI would go down or the loan tenure may reduce, keeping the EMIs same. So, by switching lenders, you will reduce your tenure by a few years. With a reduced tenure, you would save money despite the loan foreclosure fee and the processing fee. There is one risk you have to take. Most banks are offering the lower interest rate for a small period - about one year - and not for the entire tenure. All these loans are based on floating interest rates. The banks always have the option of increasing the interest rates at a later stage. There is no guarantee that the lower interest rate will remain in force later. If it increases, the entire gains from switching lenders may be wiped out. So, a borrower needs to weigh the relative costs and benefits of shifting to another lender. This will depend on the loan amount, interest rate offered, loan tenure, and other charges and penalties levied by the banks.

NRI Income in India

NRI Income in India All income earned by NRIs in India is taxable and returns are to be filed every year. Under Section 9 (I) (ii) of the IT Act, salary earned in India is chargeable to tax. Under Section 115G of the IT Act, it is not mandatory for a non-resident Indian to file returns if the tax on his Indian income constituting investment income and long term gains has been deducted at source

Resident Indian earning income on short-time assignments abroad

As a ‘resident’ Indian, not having met the eligibility status of NRI, tax is payable.
A deduction of 75% can be applied for within 6 months of the end of the financial year under Section 80RRA by technicians. The rest of the allowance is taxed at a marginal rate. Technicians include individuals working on construction/manufacturing/mining/power generation etc; agricultural activities; public administration and business management; accountancy; applied sciences and social sciences

Buying property in a metro ??..Things you should know..

 

There are different kinds of properties in metros; it could be a vacant land/site, residential or commercial building, residential apartments and commercial spaces. All of these properties have their own due diligence and documentation to be done. Before buying any property, the buyer should ensure that property is clear and marketable. In case the property is having a defective title, then person who is in current possession of the property shall have to face all the music.
One has to follow several parameters before buying a property in metros. Following are the aspects which need to be followed:

1. Vacant Land:
1.a. Land Ceiling:
There is a ceiling limit to be followed under the Urban Land Ceiling Act 1976. No person can buy a property beyond prescribed ceiling limit.
1.b. Land Acquisition:
The growth of the metros in the recent times has forced city development authorities and the municipal corporations to acquire land for development of projects like flyovers, underpasses, roads and metro-rail projects. Therefore it would be essential to obtain No-objection certificates from the authorities in order to doubly make sure that land that you intend to purchase has not been acquired.
1.c. Road cutting, High tension lines:
Ensure that there are no road cutting, high tension lines passing through your land. Any such 1.
1.d. Conversion:
Ensure that the land you intend to purchase has been converted for residential purpose. There could be semi-urban areas where still land would not have been converted from agricultural to non-agricultural residential status.

2.Residential Building or Apartments:
2.a. Reputation of the Builder/Owner:
Check the reputation of the builder or developer with whom you intend to buy your apartment/flat. In case of buildings, the history of the owner and the premises is very essential.
2. b. Title of the property:
Title of the property is a very essential aspect. The land on which your apartment is built should have a clear and marketable title. Ensure that the owner of the land has clear and marketable title.
2. c. Building bye-laws:
Check whether all building bye-laws have been complied by the builder or owner of the building. Set backs if any have to be regularized. Ensure that all such set-backs have been regularized.
2.d. Amenities:
Ensure that proper amenities like water, electricity connections are available in the building you intend to purchase.
2. e.Payment of property tax & khata:
Property tax should have to be paid for the property, post-purchase of the property ensure that Khata of the property is changed into your name and also pay the property tax to the appropriate revenue authorities.
So, next time you want to buy a property in any metro, follow the above parameters.

(This is an article which appeared in 100 floors . com a site dedicated to legal assistance on Real estate)

Categories:

Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management,  private banks, about wealth management, fund management, investment companies, financial advisor, asset management company,  banking management,  asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company,Wealth management, investments in India, taxes in india, direct investment in india,in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india,  foreign company in india, the family office,  what is family office, capital investors,  investment in assets,  fdi investments in india, portfolio investments,  investments in property, Praveen Saanker, Praveen saanker, Praveen

 

 

Resident Indian proceeding for overseas employment:- Common doubt on Income tax rules

A resident Indian proceeding overseas for employment has to apply for an Income Tax Clearance Certificate on Form 31, as per Section 230 (I) of the Income Tax Act 1961. The Assessing Officer assessing the applicant’s form would provide Form 32 which authorizes the application. Other than the Income Tax Clearance Certificate, no other information needs to be given to the IT authorities before taking up employment

For many people, estate planning falls under the same category as going to the dentist: deal with it as seldom as possible or only when absolutely necessary. In addition, those with low incomes and low net worth often feel that estate planning is unnecessary, and is a process reserved for the rich. However, what most people don't know is that proper estate planning goes beyond allocating money or other assets. There are a number of common estate planning errors that can be avoided by arming yourself with adequate knowledge about estate planning. In this article, we'll examine seven of the most common estate planning errors.

No Estate Plan
Many individuals do not realize that estate planning includes the preparation of documents such as living wills, which include provisions for touchy situations like when one should be taken off life support, as well as traditional wills, which makes provisions for the disposition of property and the guardianship of minor children. Preparing these documents helps to ensure that a person's wishes are clearly documented. Regardless of the size of the estate, preparing a will can help to prevent quarreling and bitterness among beneficiaries, who may otherwise feel that they are the rightful benefactors of a decedent's assets.

Ignoring the Sunset Provision
As of 2008, estates benefit from an exemption from federal estate taxes, for amounts up to $2 million. This amount will increase to $3.5 million in 2009, be repealed in 2010, and is scheduled to be increased to $1 million in 2011. While it may be optimistic to hope that a more favorable provision will be passed for 2011 and after, it may not wise to bank on such changes. Therefore, those with more than $1 million dollars in assets should stay abreast of any future changes so that they can be prepared to alter their estate plans accordingly, if necessary.

Being Unaware of the Gift Tax Impact on Joint Ownership
One method that many individuals use to avoid probate is to title assets in joint names with a friend, relative or other individual. However, unless an exception applies - as is the case when the joint owner is the owner's spouse - this can generate a taxable gift in the current year if 50% of the value of the asset is worth more than the annual gift tax exclusion amount.

For example, if Bill Jones puts his friend Fred's name on the title of a $50,000 car that Bill owns, Bill will be liable for gift tax on $13,000 of the car's value. The annual gift tax exclusion is $12,000 for 2007 and 2008. This means that one can give cash or assets of that amount or less to another person each year without paying gift tax. But because the car is valued at $50,000, half of the value of the car ($25,000) will legally become Fred's property; therefore,  Therefore $13,000 will be taxable.

Failure to Use Unified Credit
Failure to use unified credit is a costly error committed by an astonishing percentage of affluent households. When the first spouse passes away, generally all of his or her assets pass to the surviving spouse. However, if the deceased spouse had assets valued over the unified credit limit ($5 million as of 2008), then the exclusion for those assets will be lost if they are transferred directly to the spouse, who will then only have his or her exclusion to count against assets distributed to heirs when he or she dies. As such, a credit shelter trust should be established that shields the assets of the first spouse to die and allows his or her unified credit limit to be used as well.

Failure to Gift Assets Before Death
One of the easiest ways to reduce one's taxable estate is to gift assets to friends or relatives each year within the gift tax exclusion limit. This is a convenient way not only to reduce the taxes your estate may have to pay after you're gone, but also to see whether your beneficiaries are capable of using your assets wisely. If they squander the gifts you give them during your lifetime, then you may want to consider leaving your assets to them in an incentive trust that rewards them for fiscally responsible behavior.

Failing to Ensure Retirement Plans Have the Correct Beneficiary Designations
The beneficiaries of retirement accounts will sometimes change, particularly if the primary beneficiary predeceases the account owner. However, the account owner must usually complete a new beneficiary designation form, indicating the new beneficiary. Otherwise, the beneficiary might be determined under the default terms of the account agreement. Consider also that the payout options under most retirement plans often depend on whether the beneficiary is a spouse of the owner. Further, these options may be irrevocable after the beneficiary's initial payout election. There can be nasty tax repercussions for those who are not careful in this matter, and beneficiaries should be educated on how their elections could impact the taxes on their inherited amounts.

Make Sure You're Covered
Regardless of your income bracket, having adequate life insurance coverage is vital in most cases. Low-income households can benefit from term insurance coverage to replace income lost as a result of the death of the primary breadwinner, while affluent families may need the proceeds from insurance to provide liquidity upon the death of the insured. However, it may be important that those in the latter category transfer ownership of the policies to an irrevocable trust in order to avoid estate taxation on the death benefit.

Conclusion
These are just some of the errors that individuals often make with their estates. The good news is that many of these can be easily and quickly rectified, providing the corrective steps are taken before death. Consult with professionals who can help to ensure that your estate planning is on track. These individuals may include your financial or estate planner and your tax attorney.

by Mark P. Cussen

Mark P. Cussen has over 13 years of experience in the financial industry, which includes working with investments, insurance, mortgages, taxes and financial planning. He has two years of experience in writing and editing insurance and securities test training manuals, as well as other financial topics. He has also worked in in retail, discount and bank brokerage systems and been involved in a venture capital enterprise in the oil and gas sector. Mark has a Bachelor of Science in English from the

of

Kansas

and completed his CFP®; coursework at the Bloch School of Business at the University of Missouri-Kansas City in August of 2001.

University

A type of mortgage in which homeowners can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower's credit is not relevant, and is often unchecked, because the borrower does not need to make any payments. Because the home serves as collateral, it must be sold in order to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home).  These types of mortgages have large origination costs relative to other types of mortgages. These costs become part of the initial loan balance and accrue interest. Senior citizen borrowers with good credit should carefully analyze the options of a more traditional mortgage, such as a home equity loan, against a reverse mortgage.

Estate planning is more than simply having a will. It is a continuous planning process done to alleviate the financial impact of your death on those you leave behind. By spending just a few hours and dollars now, you can save your loved ones or beneficiaries from paying as much as a 47% estate tax. But a well-constructed estate plan may not only reduce the tax bill, but also help your loved ones understand, resolve and prepare for many of the issues that arise when settling an estate. We'll show you where to start.

Dying without a Will - Dying without a will is known as dying intestate. If this were to happen in the U.S.intestate succession laws would come into play, and your relatives would have to go through probate to claim ownership of assets, perhaps even fight over assets. The state would determine how your property passes to your heirs. If no heirs fit the state's formula, your assets may become property of the state. A will can help you avoid the pitfalls of dying intestate; however, even if you have a will, your assets will still be subjected to the timely and costly probate process (court involvement).

How a Will Can Help
A will primarily allows you to control the distribution of your assets and state your final wishes.
One very important advantage of a will is that it allows you to recommend a guardian to care for your children or other dependent beneficiaries in the event of your death. Because this is an overwhelming responsibility, you should select your guardian(s) carefully and also obtain their consent before listing them in your will. Although the final decision concerning guardianship is made by the court, the courts give a lot of weight to the parent's decision in the will.

Other important items on your will are clauses clarifying the will and its purpose. In the exordium clause, for instance, you state your name and residence, and officially declare the document a will. Be careful to note in this clause that the will supersedes all previous wills, making them null and void. In the will you should also name the executor/administrator of your estate and how you would like that person to distribute your assets, including how all your debts, taxes and funeral expenses are to be paid. To avoid family disputes, you may want to add a non-contestability clause, which states that if any beneficiary contests the will, his or her share becomes null and void. Of course, a non-contestability clause is not suitable for every family's circumstance.

How to Start on Your Estate Planning
Now that you understand the importance of having a will, here's a list of steps that gives an overview of the estate planning process:

Make a list of all your assets and liabilities.

Open a family discussion of who should be the guardian for your children.

Check and update your current beneficiaries (those designated for IRAs, life insurance, etc).

Review the current federal estate tax exemption limits (discussed below).

Determine the distribution of your assets upon your death (family, charity, etc).

Discuss your funeral arrangements with your spouse or family.

Seek the assistance of a certified estate-planning attorney.

A simple will may cover all your estate planning needs if the value of your estate falls materially below the estate-tax exclusion amount. The federal estate tax is an excise tax levied on the transfer of a person's property that exceeds a certain amount at the time of that individual's death. If your estate is worth more than the tax exclusion amount, the tax can be hefty. As such, you really need to take a serious look at your personal situation, and, if your estate is more than the tax exclusion, look into more estate-reduction and planning techniques, which will help your beneficiaries avoid the estate tax (we discuss these techniques further below). Keep in mind that direct transfers to your spouse are not taxed - these assets are not taxed until s/he dies (this is called a marital deduction).

Estate-Reduction and Planning Options
Let's take a look at some estate-planning tools and estate-reduction techniques:

Use trusts to maximize the exclusion and avoid probate. Trusts help you do so because they are designated to a beneficiary.

Take advantage of charitable donations to reduce your estate.

Use your estate to pay family educational and medical expenses as these are tax deductible.

Loan assets to family members to minimize your estate.

Buy life insurance to help pay estate taxes, but remember life insurance will provide payouts only under certain conditions (executor or beneficiary should be owner).

Utilize annual gifting (up to $12,000 per person per year) to minimize taxes and maximize the value to your loved ones on your will.

Set up durable powers of attorney.

Establish your funeral and burial plans.

Seek professional help from your financial advisor, an estate-planning specialist or a lawyer specializing in estates.

Sometimes changes in your life - such as a sudden increase in wealth, a new marriage or remarriage, the birth of a child, a serious illness or a death in the family - can trigger the need for an estate plan evaluation. All of these factors could affect your current plan and require revisions or additions.

Summary
Estate planning is truly for the benefit and care of your loved ones, making the legal and financial issues easier to deal with if you pass away. Since planning for death is not always a No.1 priority, we tend to postpone setting up the legal documents. But at a minimum, every competent adult should have a will drafted. The problems associated with probate, creditors, con artists, lawsuits, lawyers and death taxes can all prolong the settlement of your estate. Don't wait to establish your plan until you've heard someone else's horror stories.

by Steven Merkel
Steven T. Merkel, CFP®:, ChFC, is the vice president of portfolio management for Financial Advisory Consultants LLC in Naples, Fla. Steve is a former U.S. Army air defense artillery officer and has been giving financial advice for more than 12 years. He is a Certified Financial Planner® practitioner and a Chartered Financial Consultant. Merkel has been featured and widely quoted in numerous publications including The New York Times, BusinessWeek, Entrepreneur, Consumer Reports, Investment News, Financial Planning Magazine and Fidelity's Stages Quarterly. He enjoys fishing, golf, military history, Miami Hurricane football and relaxing on the beaches of South Florida

Categories Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management, private banks, about wealth management, fund management, investment companies, financial advisor, asset management company, banking management, asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company, Wealth management, investments in India, taxes in india, direct investment in india, Investment in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india, foreign company in india, the family office, what is family office, capital investors, investment in assets, fdi investments in india, portfolio investments, investments in property, Praveen Saanker, Praveen saanker, Praveen

.

Estate Planning - Top 7 Estate Planning Mistakes by Mark P. Cussen,CFP®, CMFC courtesy - Investopedia - Fantastic Estate Planning Pitch

For many people, estate planning falls under the same category as going to the dentist: deal with it as seldom as possible or only when absolutely necessary. In addition, those with low incomes and low net worth often feel that estate planning is unnecessary, and is a process reserved for the rich. However, what most people don't know is that proper estate planning goes beyond allocating money or other assets. There are a number of common estate planning errors that can be avoided by arming yourself with adequate knowledge about estate planning. In this article, we'll examine seven of the most common estate planning errors.

No Estate Plan
Many individuals do not realize that estate planning includes the preparation of documents such as living wills, which include provisions for touchy situations like when one should be taken off life support, as well as traditional wills, which makes provisions for the disposition of property and the guardianship of minor children. Preparing these documents helps to ensure that a person's wishes are clearly documented. Regardless of the size of the estate, preparing a will can help to prevent quarreling and bitterness among beneficiaries, who may otherwise feel that they are the rightful benefactors of a decedent's assets.

Ignoring the Sunset Provision
As of 2008, estates benefit from an exemption from federal estate taxes, for amounts up to $2 million. This amount will increase to $3.5 million in 2009, be repealed in 2010, and is scheduled to be increased to $1 million in 2011. While it may be optimistic to hope that a more favorable provision will be passed for 2011 and after, it may not wise to bank on such changes. Therefore, those with more than $1 million dollars in assets should stay abreast of any future changes so that they can be prepared to alter their estate plans accordingly, if necessary.

Being Unaware of the Gift Tax Impact on Joint Ownership
One method that many individuals use to avoid probate is to title assets in joint names with a friend, relative or other individual. However, unless an exception applies - as is the case when the joint owner is the owner's spouse - this can generate a taxable gift in the current year if 50% of the value of the asset is worth more than the annual gift tax exclusion amount.

For example, if Bill Jones puts his friend Fred's name on the title of a $50,000 car that Bill owns, Bill will be liable for gift tax on $13,000 of the car's value. The annual gift tax exclusion is $12,000 for 2007 and 2008. This means that one can give cash or assets of that amount or less to another person each year without paying gift tax. But because the car is valued at $50,000, half of the value of the car ($25,000) will legally become Fred's property; therefore,  Therefore $13,000 will be taxable.

Failure to Use Unified Credit
Failure to use unified credit is a costly error committed by an astonishing percentage of affluent households. When the first spouse passes away, generally all of his or her assets pass to the surviving spouse. However, if the deceased spouse had assets valued over the unified credit limit ($5 million as of 2008), then the exclusion for those assets will be lost if they are transferred directly to the spouse, who will then only have his or her exclusion to count against assets distributed to heirs when he or she dies. As such, a credit shelter trust should be established that shields the assets of the first spouse to die and allows his or her unified credit limit to be used as well.

Failure to Gift Assets Before Death
One of the easiest ways to reduce one's taxable estate is to gift assets to friends or relatives each year within the gift tax exclusion limit. This is a convenient way not only to reduce the taxes your estate may have to pay after you're gone, but also to see whether your beneficiaries are capable of using your assets wisely. If they squander the gifts you give them during your lifetime, then you may want to consider leaving your assets to them in an incentive trust that rewards them for fiscally responsible behavior.

Failing to Ensure Retirement Plans Have the Correct Beneficiary Designations
The beneficiaries of retirement accounts will sometimes change, particularly if the primary beneficiary predeceases the account owner. However, the account owner must usually complete a new beneficiary designation form, indicating the new beneficiary. Otherwise, the beneficiary might be determined under the default terms of the account agreement. Consider also that the payout options under most retirement plans often depend on whether the beneficiary is a spouse of the owner. Further, these options may be irrevocable after the beneficiary's initial payout election. There can be nasty tax repercussions for those who are not careful in this matter, and beneficiaries should be educated on how their elections could impact the taxes on their inherited amounts.

Make Sure You're Covered
Regardless of your income bracket, having adequate life insurance coverage is vital in most cases. Low-income households can benefit from term insurance coverage to replace income lost as a result of the death of the primary breadwinner, while affluent families may need the proceeds from insurance to provide liquidity upon the death of the insured. However, it may be important that those in the latter category transfer ownership of the policies to an irrevocable trust in order to avoid estate taxation on the death benefit.

Conclusion
These are just some of the errors that individuals often make with their estates. The good news is that many of these can be easily and quickly rectified, providing the corrective steps are taken before death. Consult with professionals who can help to ensure that your estate planning is on track. These individuals may include your financial or estate planner and your tax attorney.

by Mark P. Cussen

Mark P. Cussen has over 13 years of experience in the financial industry, which includes working with investments, insurance, mortgages, taxes and financial planning. He has two years of experience in writing and editing insurance and securities test training manuals, as well as other financial topics. He has also worked in in retail, discount and bank brokerage systems and been involved in a venture capital enterprise in the oil and gas sector. Mark has a Bachelor of Science in English from the

of

Kansas

and completed his CFP®; coursework at the Bloch School of Business at the University of Missouri-Kansas City in August of 2001.

University

Reverse Mortgage Demystified

A type of mortgage in which homeowners can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower's credit is not relevant, and is often unchecked, because the borrower does not need to make any payments. Because the home serves as collateral, it must be sold in order to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home).  These types of mortgages have large origination costs relative to other types of mortgages. These costs become part of the initial loan balance and accrue interest. Senior citizen borrowers with good credit should carefully analyze the options of a more traditional mortgage, such as a home equity loan, against a reverse mortgage.

Getting Started On Your Estate Plan by Steven Merkel,CFP®, ChFC - courtesy - investopedia

Estate planning is more than simply having a will. It is a continuous planning process done to alleviate the financial impact of your death on those you leave behind. By spending just a few hours and dollars now, you can save your loved ones or beneficiaries from paying as much as a 47% estate tax. But a well-constructed estate plan may not only reduce the tax bill, but also help your loved ones understand, resolve and prepare for many of the issues that arise when settling an estate. We'll show you where to start.

Dying without a Will - Dying without a will is known as dying intestate. If this were to happen in the U.S.intestate succession laws would come into play, and your relatives would have to go through probate to claim ownership of assets, perhaps even fight over assets. The state would determine how your property passes to your heirs. If no heirs fit the state's formula, your assets may become property of the state. A will can help you avoid the pitfalls of dying intestate; however, even if you have a will, your assets will still be subjected to the timely and costly probate process (court involvement).

How a Will Can Help
A will primarily allows you to control the distribution of your assets and state your final wishes.
One very important advantage of a will is that it allows you to recommend a guardian to care for your children or other dependent beneficiaries in the event of your death. Because this is an overwhelming responsibility, you should select your guardian(s) carefully and also obtain their consent before listing them in your will. Although the final decision concerning guardianship is made by the court, the courts give a lot of weight to the parent's decision in the will.

Other important items on your will are clauses clarifying the will and its purpose. In the exordium clause, for instance, you state your name and residence, and officially declare the document a will. Be careful to note in this clause that the will supersedes all previous wills, making them null and void. In the will you should also name the executor/administrator of your estate and how you would like that person to distribute your assets, including how all your debts, taxes and funeral expenses are to be paid. To avoid family disputes, you may want to add a non-contestability clause, which states that if any beneficiary contests the will, his or her share becomes null and void. Of course, a non-contestability clause is not suitable for every family's circumstance.

How to Start on Your Estate Planning
Now that you understand the importance of having a will, here's a list of steps that gives an overview of the estate planning process:

Make a list of all your assets and liabilities.

Open a family discussion of who should be the guardian for your children.

Check and update your current beneficiaries (those designated for IRAs, life insurance, etc).

Review the current federal estate tax exemption limits (discussed below).

Determine the distribution of your assets upon your death (family, charity, etc).

Discuss your funeral arrangements with your spouse or family.

Seek the assistance of a certified estate-planning attorney.

A simple will may cover all your estate planning needs if the value of your estate falls materially below the estate-tax exclusion amount. The federal estate tax is an excise tax levied on the transfer of a person's property that exceeds a certain amount at the time of that individual's death. If your estate is worth more than the tax exclusion amount, the tax can be hefty. As such, you really need to take a serious look at your personal situation, and, if your estate is more than the tax exclusion, look into more estate-reduction and planning techniques, which will help your beneficiaries avoid the estate tax (we discuss these techniques further below). Keep in mind that direct transfers to your spouse are not taxed - these assets are not taxed until s/he dies (this is called a marital deduction).

Estate-Reduction and Planning Options
Let's take a look at some estate-planning tools and estate-reduction techniques:

Use trusts to maximize the exclusion and avoid probate. Trusts help you do so because they are designated to a beneficiary.

Take advantage of charitable donations to reduce your estate.

Use your estate to pay family educational and medical expenses as these are tax deductible.

Loan assets to family members to minimize your estate.

Buy life insurance to help pay estate taxes, but remember life insurance will provide payouts only under certain conditions (executor or beneficiary should be owner).

Utilize annual gifting (up to $12,000 per person per year) to minimize taxes and maximize the value to your loved ones on your will.

Set up durable powers of attorney.

Establish your funeral and burial plans.

Seek professional help from your financial advisor, an estate-planning specialist or a lawyer specializing in estates.

Sometimes changes in your life - such as a sudden increase in wealth, a new marriage or remarriage, the birth of a child, a serious illness or a death in the family - can trigger the need for an estate plan evaluation. All of these factors could affect your current plan and require revisions or additions.

Summary
Estate planning is truly for the benefit and care of your loved ones, making the legal and financial issues easier to deal with if you pass away. Since planning for death is not always a No.1 priority, we tend to postpone setting up the legal documents. But at a minimum, every competent adult should have a will drafted. The problems associated with probate, creditors, con artists, lawsuits, lawyers and death taxes can all prolong the settlement of your estate. Don't wait to establish your plan until you've heard someone else's horror stories.

by Steven Merkel
Steven T. Merkel, CFP®:, ChFC, is the vice president of portfolio management for Financial Advisory Consultants LLC in Naples, Fla. Steve is a former U.S. Army air defense artillery officer and has been giving financial advice for more than 12 years. He is a Certified Financial Planner® practitioner and a Chartered Financial Consultant. Merkel has been featured and widely quoted in numerous publications including The New York Times, BusinessWeek, Entrepreneur, Consumer Reports, Investment News, Financial Planning Magazine and Fidelity's Stages Quarterly. He enjoys fishing, golf, military history, Miami Hurricane football and relaxing on the beaches of South Florida

Categories Financial management, asset management, investment banking, investment management, portfolio management, financial planner, personal banking, private bank, private banking, what is private banking, what is wealth management, wealth management, private banks, about wealth management, fund management, investment companies, financial advisor, asset management company, banking management, asset managers, certified financial planner, financial advisors, wealth creation, investment in, investments in, direct investment, capital investment, investment in company, Wealth management, investments in India, taxes in india, direct investment in india, Investment in business, investment in companies, wealth in india, financial advisors, direct investments,portfolio investment, investment and finance, capital investments, family office, foreign companies in india, foreign investments in india, foreign company in india, the family office, what is family office, capital investors, investment in assets, fdi investments in india, portfolio investments, investments in property, Praveen Saanker, Praveen saanker, Praveen

.