NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Estate Planning

Estate Assets, Liabilities and Succession Basics

Updated 11 October 2026 · Fact-checked

Your estate is everything you own (assets) minus everything you owe (liabilities) at a point in time. Succession is how that net wealth passes to others after death. It is testate if a valid will exists and intestate if it does not. To solve questions, classify, net, then identify the route.

Understand Estate Assets, Liabilities and Succession Basics

An estate is the total wealth a person leaves behind. It includes assets (what you own) and liabilities (what you owe). The net estate is assets minus liabilities. This is the amount that can actually be passed on.

Assets are grouped in a few ways. Financial assets include bank deposits, shares, bonds, mutual fund units, insurance policies, and EPF, PPF and NPS balances. Physical or real assets include land, house, gold and vehicles. Other assets include business interests and intangible items such as intellectual property. You can also split assets into movable and immovable, and into liquid (easy to turn into cash) and illiquid (hard to sell fast, such as land).

Liabilities are claims against the estate. Examples are home loans, personal loans, credit card dues, vehicle loans, business debts, unpaid taxes and outstanding bills. An adviser must list them, because they reduce what heirs receive. Contingent liabilities, such as a guarantee given for someone else's loan, may become real later, so they must be noted.

Succession is the transfer of a person's property to others on death. Under testate succession, the person left a valid will, and the property goes as the will directs. Under intestate succession, there is no valid will, so the property goes by the personal law that applies to the person, such as the Hindu, Muslim, Christian or Parsi law. Succession is different from a gift, which is made during life, and from a nomination, which only names a person to receive money and is not by itself proof of ownership.

Succession planning means arranging in advance who gets what, who manages it and how debts are paid, so that wealth moves smoothly and with less dispute. For valuation, an adviser records each asset at current market or fair value as on a stated date, and records liabilities at the amount outstanding.

Key formulas to remember

Net estate: Net estate = Total assets − Total liabilities; Value assets at current market or fair value on the same date as the liabilities.
Testate succession: Valid will exists → property passes as per the will; The will must be valid. An invalid will leads to intestacy.
Intestate succession: No valid will → property passes as per applicable personal law; Law depends on the person's religion and personal law, not on the adviser's choice.
Liquid vs illiquid: Liquidity = how quickly an asset converts to cash without big loss; Estates rich in illiquid assets may struggle to pay debts and expenses.

How to solve Estate Assets, Liabilities and Succession Basics questions

Use this order for any question on estate assets, liabilities or succession.

1Read what is asked: classification, net estate value, or type of succession.
2List every asset and tag it as financial, physical or other, and liquid or illiquid.
3List every liability, including loans, dues and possible contingent liabilities.
4Use the same valuation date for all items and take current market or fair value for assets.
5Compute net estate = assets − liabilities, if a number is needed.
6Check whether a valid will exists. If yes, it is testate. If no, it is intestate.
7For intestate cases, remember that personal law decides the heirs.
8Eliminate options that confuse nomination, gift or will with each other.

Quickest way: Three-check shortcut

When to use it: Use this for definition and scenario MCQs when time is short.

Check 1: Is it owned (asset) or owed (liability)?
Check 2: Is there a valid will? Yes means testate, no means intestate.
Check 3: Is the question about net value? Subtract liabilities from assets and ignore anything not owned by the person.

Common mistakes in Estate Assets, Liabilities and Succession Basics

Treating net estate as total assets.
Students focus on what is owned and forget debts.
Fix: Always subtract liabilities before stating what heirs can receive.
Calling a person's death without a will testate.
Testate and intestate sound alike.
Fix: Remember: testate has a valid will, intestate has none or an invalid one.
Assuming a nominee becomes full owner.
Nomination feels like a transfer of ownership.
Fix: A nominee mainly receives the asset to hold or collect. Ownership passes by will or succession law, subject to what the law and the instrument say.
Ignoring contingent liabilities.
They are not yet due, so they seem unreal.
Fix: Note guarantees and pending claims as possible future liabilities in estate analysis.
Valuing assets at purchase cost.
Cost is easy to remember.
Fix: Use current market or fair value on the valuation date.
Thinking succession and gift are the same.
Both move wealth to another person.
Fix: Succession happens on death. A gift is made during the donor's life.

Worked examples

Example 1

A client has a house worth ₹80,00,000, shares and mutual funds worth ₹25,00,000, bank deposits of ₹5,00,000 and gold worth ₹10,00,000. Liabilities are a home loan of ₹30,00,000 and a personal loan of ₹5,00,000. Find the net estate.

Show the solution

Total assets = 80,00,000 + 25,00,000 + 5,00,000 + 10,00,000 = ₹1,20,00,000.
Total liabilities = 30,00,000 + 5,00,000 = ₹35,00,000.
Net estate = 1,20,00,000 − 35,00,000 = ₹85,00,000.

Answer: The net estate is ₹85,00,000.

Example 2

Mr. Rao dies without leaving any will. His property is divided among his relatives. Which type of succession is this, and what decides who gets the property?

Show the solution

There is no will, so the succession is not testate.
Succession without a valid will is intestate succession.
In intestate succession the heirs and shares are decided by the personal law applicable to the deceased.

Answer: It is intestate succession, and the applicable personal law decides the heirs and their shares.

Exam tips

Expect simple definition questions: testate versus intestate, asset versus liability, liquid versus illiquid.
In numerical questions, subtract liabilities first and check the units and the Indian-style figures.
Watch for trap options that say a nominee is always the legal owner. Do not choose them.
If a question says the will is invalid, treat the case as intestate.
Wrong answers cost marks under negative marking, so skip if you cannot rule out two options.

Practice questions from Basics of Estate Planning

Estate Assets, Liabilities and Succession Basics in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

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Estate Assets, Liabilities and Succession Basics: frequently asked questions

What are the types of assets in estate planning in India?

Common groups are financial assets (deposits, shares, mutual funds, insurance, EPF, PPF, NPS), physical assets (property, gold, vehicles) and other assets such as business interests. They can also be split into movable and immovable, or liquid and illiquid.

What is the difference between testate and intestate succession?

Testate succession happens when the person leaves a valid will and property goes as the will says. Intestate succession happens when there is no valid will, so personal law decides who inherits.

What is succession planning in NISM?

It is planning in advance who will receive your assets, who will manage them and how debts will be settled. The aim is a smooth transfer of wealth with fewer disputes.

How are estate assets and liabilities valued?

Assets are recorded at current market or fair value on a chosen date, and liabilities at the outstanding amount on the same date. Net estate is assets minus liabilities.