Archive / Investment Adviser (Level 2) / Basics of Estate Planning

nism-series-xb-will-as-loan-collateral-legal-validity[ INVESTMENT ADVISER (LEVEL 2) ]

In Practice Case 10, 'L' has executed and registered a Will bequeathing her residential house to her son. The son approaches a commercial bank to obtain a mortgage loan, submitting the registered Will as collateral security for his future ownership. Is this a legally valid loan application?

[ A ]Yes, because the Will is registered with the Sub-Registrar

[ B ]No, because a Will takes legal effect only upon the testator's demise; during L's lifetime, the son has no legal title or transferable interest, and L can alter or revoke the Will at any time[ CORRECT ]

[ C ]Yes, provided the son obtains a Succession Certificate from the District Court

[ D ]Yes, because sons are Class I legal heirs under the Hindu Succession Act

Takeaway

A Will confers no present title or right during the testator's lifetime, so L's son cannot legally use it as loan collateral while L is alive; option B is correct.

Derivation

A Will only takes legal effect on the death of the testator; until then it remains fully revocable, and the named legatee has no vested or transferable interest in the bequeathed property. Registration with the Sub-Registrar authenticates that the document was executed, but it does not make the Will operative or create present ownership rights. Since the son has no legal title to offer, a bank cannot accept an unopened Will as valid loan collateral. This tests a core estate-planning distinction candidates often miss — that registration and legal effect are two entirely separate concepts, and a Will's revocability during the testator's lifetime is precisely what disqualifies it as security.

Why the others fail

A — Yes, because the Will is registered with the Sub-Registrar

Registration of a Will with the Sub-Registrar provides evidentiary authenticity of execution, but does not make the Will operative or transfer ownership during L's lifetime.

C — Yes, provided the son obtains a Succession Certificate from the District Court

A succession certificate can only be granted after the death of the property owner; it cannot be obtained while L is still alive.

D — Yes, because sons are Class I legal heirs under the Hindu Succession Act

Class I heirship under the Hindu Succession Act confers rights only upon intestate succession after death, not any present ownership right during the parent's lifetime.