NRIs: Here’s what you need to know when writing a will

Rishabh Shroff, co-partner and head-private client at Cyril Amarchand Mangaldas, addresses some of the frequently asked questions on estate planning for NRIs in an interview with Mint. Edited excerpts:

When testator is a NRI

Can NRIs prepare a will for their assets in India?

When individuals reside overseas, they often come into possession of two categories of assets. First, they may have assets located in the country they reside in, including a local bank account, and properties. Second, they may possess self-acquired or inherited assets in India. In such cases, it is advisable to draft two separate wills. One that pertains to their global assets outside of India and another that specifically address their Indian assets. These two wills operate concurrently. The Indian will must comply with Indian laws, both at the time of drafting and in relation to any probate, if applicable.

Should the NRI be present in India when writing an Indian will?

Physical presence is not required to draft a will governing Indian assets. It can be drafted anywhere in the world and will be valid as long as it follows the requirements under the Indian Succession Act. The will needs to be signed by the testator (the individual drafting the will) and two witnesses. There is no other requirement.

For wills relating to foreign assets, the requirements will vary depending on the country in which the will is to be executed. For example, in Singapore, the requirements are more or less the same as in India.

 

Can witnesses be NRIs as well?

Yes. But, at the probate stage, the witnesses may need to submit an affidavit to the Indian court that they were indeed witness to the testator signing the will. Depending on where the NRI witnesses reside, a letter to that effect from a notary in their home jurisdiction would also suffice.

Can the will be signed via video conferencing with witnesses from India?

This is not permitted under Indian law. The law requires that the two witnesses be physically present when the will is being signed.

Is it recommended to have an executor in India?

Yes, it is strongly advisable. An executor is an individual appointed by the person drafting a will (referred to as the testator) to carry out the instructions and wishes stated in the will after their death. Executors have bigger responsibilities, requiring physical visits to the concerned court as well. They may need to fulfil various legal formalities, render accounts, etc.

Note that the Indian Succession Act allows more than one executor to be appointed, and hence you can consider having one local executor based in India, and an NRI as well if required in certain circumstances.

Does the registration of a will hold more significance for NRIs?

The benefits and drawbacks remain unchanged regardless of the person’s residency. The primary advantage of registration is to establish the authenticity of the will and the testator’s signature, thereby avoiding any dispute on these specific grounds. If such concerns do not exist, registration can be omitted. It is important for NRIs to be physically present in India for registering a will in the country. They can also consider attesting the will abroad at the local embassy as per an established process.

Can a will written and registered outside India be enforced in the country?

Indeed, it is possible. This scenario is quite common when an NRI has a comprehensive ‘global’ will covering both Indian and foreign assets. If probate or legal processes are completed for such a will in the foreign country, it can be applied to the relevant Indian court to have it authenticated. The specific procedure may vary among Indian courts, but generally, the Indian court will review the foreign will and its probate based on its merits. If deemed appropriate, the court will issue relevant orders to extend its applicability to Indian assets. In almost all cases, this is never an issue.

When legal heir is a NRI

Are there any restrictions on the types of properties an NRI cannot inherit?

Put conversely, an NRI can inherit any asset under an Indian Will. This includes assets such as agricultural land.

What considerations should one keep in mind when drafting a will for a legal heir residing abroad?

The Foreign Exchange Management Act (FEMA) 1999, rules would be applicable in such cases. The primary issue that an NRI will face when planning for inheritance from India would be the exchange control limits on the funds that can be remitted outside India. Likewise, if agricultural land is involved and needs to be bequeathed to an NRI heir, or if a testamentary trust (a trust that comes into effect after the death of the testator) is created with NRIs as beneficiaries, they need to take proper legal advice.

Should NRIs who are legal heirs visit India at the time of inheritance?

The key person during the inheritance process would be the executor of the will, who is legally responsible for ensuring that the transfer of assets is done properly in accordance with the will’s instructions. The residency of the legal heir is not relevant and the NRI heirs are not strictly required to visit India to get any assets transferred to them.

Depending on the complexities of the estate involved, an NRI can appoint a power of attorney in India to handle the relevant legal affairs, for example - if any part of the estate is under dispute.

Are there any permissions needed from the Reserve Bank of India by the legal heir?

No permission is required at the time of writing the will. We often see complications arise when cash needs to be remitted from India to the NRI living overseas, where exchange control limits are applicable. Likewise, where Indian trusts are set up with only NRI beneficiaries, these fall into a grey area of FEMA and complications arise when overseas distributions are contemplated. NRIs should decide if they wish to access such assets within India itself or remit them overseas—if only for use in India, things are much smoother.

Are there any limitations for an NRI legal heir who wishes to sell an inherited property?

No, it is common for NRIs to sell off inherited properties as they may not want the responsibility and costs associated with managing old ancestral properties. However, it is important for NRIs to ensure that the title transfer process is handled carefully as per law. This may involve filing for probate, if applicable, and ensuring that the title documents are appropriately mutated in their favour. By doing so, the NRI can establish a clear and marketable title for the property, which can potentially get a better sale price as well.

What are the limits on the repatriation of sale proceeds of inherited property?

NRIs are permitted to remit up to $1 million per year as capital, in addition to an unlimited amount of current income (subject to evaluation to confirm it qualifies as current income). If the sale proceeds of the inherited property exceed this limit, the remittance may need to be spread out over multiple financial years. While it is theoretically and legally possible to apply to the RBI for permission to remit a larger amount, the chances of obtaining such permission are extremely slim.

The NRI can consider leasing the property or reinvest the excess sale proceeds into a more suitable property for the long term instead.

What about the levy of inheritance tax?

India does not impose an inheritance tax or estate duty at present, and there are no indications of the current government intending to reintroduce such a tax. However, it is important to note that many countries do levy an estate duty, typically ranging around 40%. The citizenship and residency of the testator and legal heir, and the location of the properties play a key role in determining the tax levy. Therefore, when NRIs engage in global estate planning, it becomes crucial for them to carefully consider the tax efficiency of bequests made under their wills (or even lifetime gifts). Failure to do so may result in significant tax liability for their family members. Especially, NRIs with US green card/passports need to seek advice early in their planning.

How are domicile and citizenship different and how will this impact the will?

Domicile can be defined as having a permanent home or place where a person resides with the intention of remaining there for an indefinite period. Citizenship, on the other hand, relates to an individual’s formal legal status in a particular country. It is typically granted on birth within a specific country’s territory. India does not allow dual citizenship.

Domicile holds limited relevance in this era of global mobility. The key area where domicile plays a role is for UK–India-related succession, where claiming valid Indian domicile status can save the legal heir from paying 40% inheritance tax in the UK.

A legal heir holding Indian citizenship has relevance in terms of certain assets that can only be owned by citizens, for example, shares of companies in certain sensitive sectors, and agricultural land. But these are the minor exceptions.