NISM Series X-B · Unit 4 of 6 · about 13% of the paper
Estate planning: NISM Series X-B notes and practice questions
20 marks. Passing wealth smoothly through wills, nominations, trusts and succession law.
What to know in Unit 4
- Wills and probate.
- Succession laws.
- Trusts.
- Nomination versus legal heirs.
Key terms, examples and exam traps
Estate planning
Estate planning arranges how assets will pass to the next generation, minimising disputes, delay and cost.
Example. A client documents her wishes while alive.
Exam trap. This statement is false: It begins only after death.
Will
A will is a legal declaration of how a person wants her property distributed after death, and it takes effect only on death.
Example. A testator names her heirs in a signed will.
Exam trap. This statement is false: A will operates from the date of signing.
Testator and executor
The testator makes the will and the executor is the person appointed to carry it out.
Example. A friend named to execute the will.
Exam trap. This statement is false: The executor makes the will.
Valid will
A will must be in writing, signed by the testator and attested by two witnesses, and registration is optional.
Example. A will signed before two witnesses.
Exam trap. This statement is false: Registration is compulsory.
Revoking a will
A will can be changed or revoked any time before death, and a later will overrides the earlier one.
Example. A client writes a new will after marriage.
Exam trap. This statement is false: A will cannot be changed after signing.
Intestate succession
If a person dies without a will, the property passes according to personal succession laws.
Example. A man dies without a will and the law decides.
Exam trap. This statement is false: The state takes the property.
Hindu Succession Act
This Act governs intestate succession among Hindus, with equal rights for sons and daughters in coparcenary property.
Example. A daughter inherits equally.
Exam trap. This statement is false: Daughters have no rights under the Act.
Indian Succession Act
This Act governs wills and succession for Christians and others, and the rules for probate of wills.
Example. A will's probate rules.
Exam trap. This statement is false: It applies only to Hindus.
Muslim personal law
Muslims follow personal law for succession, with defined shares, and a will is limited to a share of the estate.
Example. A Muslim testator is limited in the portion she can will away.
Exam trap. This statement is false: A Muslim may will away the whole estate freely.
Probate
Probate is the court's certification that a will is genuine and gives the executor authority to act.
Example. An executor obtains it to transfer assets.
Exam trap. This statement is false: Probate is a tax on the estate.
Nomination
A nominee receives assets on the holder's death but may hold them for the legal heirs, depending on the law that applies.
Example. A bank pays a nominee and the nominee holds it for heirs.
Exam trap. This statement is false: A nominee overrides the will in all cases.
Legal heirs
Legal heirs are the persons entitled under succession law or a will, and they can claim assets irrespective of nomination in many cases.
Example. Heirs may claim the share from the nominee.
Exam trap. This statement is false: Legal heirs have no claim if a nominee exists.
Succession certificate
A succession certificate lets the heirs of a person who died without a will collect debts and securities.
Example. Heirs obtain it to claim bank dues.
Exam trap. This statement is false: It is required for all wills.
Trust
A trust holds property for the benefit of others under a trustee, allowing control, privacy and protection.
Example. A settlor creates a trust for her children.
Exam trap. This statement is false: A trust is a type of will.
Settlor, trustee, beneficiary
The settlor creates the trust, the trustee manages it and the beneficiary gets the benefits.
Example. The trustee manages assets for the beneficiary.
Exam trap. This statement is false: The beneficiary manages the trust.
Revocable and irrevocable trust
A revocable trust can be changed or ended by the settlor, while an irrevocable trust cannot, giving stronger separation of assets.
Example. A settlor retains the power to cancel the trust.
Exam trap. This statement is false: An irrevocable trust can be withdrawn easily.
Private trust
A private trust may be set up for the family to hold assets, manage inheritance and protect minors or dependants.
Example. A family trust holds a business stake.
Exam trap. This statement is false: A private trust must be registered as a charity.
Power of attorney
A power of attorney authorises another person to act for the principal during life and ends on the principal's death.
Example. An agent signs documents when the owner is abroad.
Exam trap. This statement is false: A power of attorney continues after death.
Gifting
Gifting during life transfers ownership immediately via a gift deed, and property gifts require registration.
Example. A parent gifts a flat to a child by registered deed.
Exam trap. This statement is false: An oral gift of property is valid.
Inheritance tax
India has no inheritance or estate tax at present, but income from inherited assets is taxable to the heir.
Example. An heir pays tax on rent from an inherited flat.
Exam trap. This statement is false: India taxes the transfer on inheritance.
Cost of inherited assets
For capital gains, the cost of an inherited asset is the cost to the previous owner and the holding period includes the previous holder's period.
Example. An heir sells an inherited house.
Exam trap. This statement is false: The cost is the value on the date of death only.
Joint holding
In a joint account with 'either or survivor', the surviving holder operates the account on the death of the other.
Example. A spouse continues to access the account.
Exam trap. This statement is false: Joint accounts are frozen on any death.
Guardian for minors
A will can name a guardian for minor children, and a trust can manage their assets until adulthood.
Example. A parent appoints a guardian in the will.
Exam trap. This statement is false: Minors can hold and sell property directly.
Family settlement
A family settlement is an arrangement among family members to divide property and avoid disputes.
Example. Siblings agree on the division of assets in writing.
Exam trap. This statement is false: A family settlement needs no document.
Review of estate plan
The plan should be updated after marriage, birth, divorce, death or major changes in assets.
Example. A client updates the will after a new child.
Exam trap. This statement is false: An estate plan never needs revision.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which statement best describes “Trust”?
- The human life value approach sets cover as the present value of the future earnings that the family would lose.
- CAPM gives the required return as the risk-free rate plus beta times the market risk premium.
- A trust holds property for the benefit of others under a trustee, allowing control, privacy and protection.
- The way information is presented influences the decision, even when facts are the same.
Q2. Which statement best describes “Intestate succession”?
- Taxpayers expecting liability above a threshold pay advance tax in instalments through the year.
- If a person dies without a will, the property passes according to personal succession laws.
- Loss aversion is the tendency to feel the pain of a loss more than the pleasure of an equal gain.
- An immediate annuity starts paying soon after purchase, while a deferred annuity starts after an accumulation phase.
Q3. A will takes effect
- Only after the death of the person who made it
- When it is registered
- When the executor accepts it
- On the day it is signed
Q4. Which term is described here? Muslims follow personal law for succession, with defined shares, and a will is limited to a share of the estate.
- Power of attorney
- Liquidity ratio
- ULIP
- Muslim personal law
Q5. Which term is described here? A private trust may be set up for the family to hold assets, manage inheritance and protect minors or dependants.
- Estate planning
- Home loan benefits
- Retirement planning
- Private trust
Q6. Which statement best describes “Review of estate plan”?
- Poor returns in the early years of retirement hurt more because withdrawals deplete the corpus.
- A succession certificate lets the heirs of a person who died without a will collect debts and securities.
- The plan should be updated after marriage, birth, divorce, death or major changes in assets.
- Judging the likelihood of an event by how easily examples come to mind.
Frequently asked questions
How much of NISM Series X-B comes from Unit 4?
Unit 4 (Estate planning) usually carries about 13% of the questions. The whole exam has 120 questions and the pass mark is 60%.
What should I study in NISM Series X-B Unit 4?
Wills and probate. Succession laws. Trusts. Nomination versus legal heirs.
Are these NISM Series X-B practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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