NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2)

Tools for Estate Planning: formula sheet

Full chapter guide

Key formulas

Estate: Net estate = Total assets − Total liabilities; Liabilities include loans and dues. Planning is done on the net position.
Process order: Gather facts → Set objectives → Analyse gaps → Choose tools → Implement → Review; Exams test the sequence. Review is ongoing, not a one-time step.
Tool-to-need match: Will = wishes on death | Trust = control and staged transfer | Gift = transfer during life | Nomination = smooth payout by institution; Remember that a nomination alone does not always settle ownership against legal heirs.
Capacity to make a will: Adult (18 or older) + sound mind + free consent; A minor cannot make a will. A person of unsound mind can make one during a lucid interval. A will, or any part of it, caused by fraud, coercion or undue influence is void.
Execution of an unprivileged will: Testator signs or marks + two or more witnesses attest, each having seen the testator sign or received a personal acknowledgement of the signature; The witnesses need not read the will. Each witness signs in the presence of the testator. Under Section 67, a bequest to an attesting witness or the witness's spouse is void. The witness is still competent and the will remains valid. Independent witnesses are advisable, but the Act does not require them. A beneficiary-witness only forfeits the bequest.
Privileged will: Soldier in actual warfare / airman engaged in actual warfare / mariner at sea; It can be oral or written and needs no strict formalities. Every other will is unprivileged.
Codicil: Will + Codicil = one testamentary document; A codicil needs the same execution formalities as a will. It can only alter or explain a will already made.
Revocation: Later will or codicil, destruction with intent, or written revocation executed like a will; A will can be revoked by a later will or codicil, by a written revocation executed like a will, or by destruction with intent to revoke. Check the workbook for any rule on revocation by marriage.
Probate: Probate = court grant proving the will + authority of the executor; Only an executor named in the will can get probate. If no executor is named, a beneficiary can apply for letters of administration with the will annexed. Section 213 does not make probate compulsory. It bars establishing a right as executor or legatee in court without probate for wills of Hindus, Buddhists, Sikhs and Jains made within the local limits of the ordinary original civil jurisdiction of the High Courts at Calcutta, Madras and Bombay. It also covers such wills made outside those limits that relate to immovable property within them.
Registration: Registration of a will is optional; A registered will is not automatically valid, and an unregistered will is not invalid.
Three core parties: Settlor (creates) → Trustee (holds and manages) → Beneficiary (benefits); The trust deed sets the terms. One person may hold more than one role, but a sole trustee cannot be the sole beneficiary.
Revocable vs irrevocable: Revocable = settlor can cancel or change; Irrevocable = settlor cannot take it back; Irrevocable gives stronger asset protection. Revocable gives flexibility and control.
Specific vs discretionary: Specific = shares fixed in deed; Discretionary = trustee decides shares; Discretionary suits uncertain future needs, such as minors or spendthrift beneficiaries.
Governing law: Private trusts in India: Indian Trusts Act, 1882; Used for private trusts, including family trusts. Do not confuse with charitable trust laws.
MWP Act policy: Policy under Section 6 MWP Act = trust for spouse and/or children; proceeds protected from creditors and outside the estate; Section 6 requires the policy to be expressed on its face to be for the benefit of the spouse and/or children. Without that, the policy is not a Section 6 trust and the spouse or children are not beneficiaries under it.
Karta and coparcener: HUF = Karta (manager) + coparceners (members by birth) + other family members; Do not mix up the head with the members. The karta manages the HUF property.
HUF tax status: HUF = separate assessee, taxed separately from its members; The HUF is a taxable entity with its own PAN.
LLP liability: Partner's liability = limited to agreed contribution; Different from a normal partnership where partners have unlimited liability.
Family settlement: Family settlement = written, voluntary, fair, settles actual or possible disputes; Exam options often claim it is only valid if registered. Judge on the facts, not on this claim.

Quick revision

A will takes effect only after the death of the person who made it.
A codicil is an addition or change to an existing will.
A gift works during the donor's lifetime and needs no death to take effect.
A trust separates legal ownership held by the trustee from benefit enjoyed by the beneficiary.
The settlor creates the trust, the trustee manages it and the beneficiary receives the benefit.
A power of attorney lets another person act for you and does not pass ownership at death.
A nominee is generally seen as a person who receives the asset on the holder's behalf, so check your workbook on rights of legal heirs.
Insurance can give quick liquidity to the family for expenses and dues.
An HUF is a separate family structure with its own members and a head called the Karta.
Always match the tool to the client's goal, timing and control needs.
Dying without a will leaves the estate to be divided by the law applicable to the person.

Common mistakes

Treating estate planning as only writing a will. Fix: Remember it covers will, trust, gift, nomination, insurance and structures, plus review.
Placing review before implementation or skipping it. Fix: Review is the last step and repeats whenever life events or law change.
Believing a will must be registered to be valid. Fix: Remember registration of a will is optional. It helps as evidence but does not decide validity.
Thinking a codicil can be informal because it is a small change. Fix: A codicil needs the same signing and two-witness attestation as a will.
Mixing up settlor and trustee Fix: Settlor creates and gives. Trustee holds and manages. Beneficiary receives.
Saying a revocable trust gives full asset protection Fix: Because the settlor can take back a revocable trust, it offers weaker protection. Stronger protection comes with irrevocability.
Treating a nominee as the legal owner of insurance proceeds Fix: Only a nominee who is the policyholder's spouse, child or parent is a beneficiary nominee. Any other nominee is only a collection agent, so the legal heirs may claim under succession law, unless the policy is under the MWP Act or a valid assignment exists.
Saying any policy gets MWP protection automatically Fix: The MWP Act benefit applies only when the policy is expressed on its face to be for the benefit of the spouse and/or children.

Exam tips

Learn the six-step process order exactly. Sequence questions are common.
Match scenario keywords to tools: control and minors point to trust, wishes on death to will.
Remember the adviser's boundary: coordinate with legal and tax professionals, do not draft documents.
Watch for absolute words like always or only in options. Estate planning depends on the client's facts.
Where negative marking applies, skip only if you cannot remove two options.
Learn the one-line definitions: testator, executor, codicil, probate, intestate. Many questions are direct recall.
Watch for options that say registration is mandatory. That is a standard trap.
Know the three categories of privileged will makers: soldier, airman and mariner, in the conditions the workbook gives.