PERSONALISED INVESTMENT MANAGERS
All of us know death is not a pleasant topic to think or talk about, but we all must understand that it is an eventuality. Therefore, it is important that we do our estate planning such that it is distributed as we would like it to be done. While ostensibly life expectancy has been on the rise since the last 40 years, thanks to advances in medical science, but at the same time, people are also dying young suddenly… with NO NOTICE, primarily due to cardiac issues.
A friend of mine who started running marathons at the age of 40 collapsed during one, despite having prepared over the last two years. Another died on the badminton court trying to destress from office pressure. The premature demise of many prominent actors at their young age, due to a heart attack also brought to the fore, concerns that people are dying younger. Work hard, Play harder has become the mantra for people in corporate jobs, most of whom are typically known to sleep less, starve, work more and work out hard. There is also still no evidence of how Covid affects people with pre-existing health conditions, over the long term.
Your family can not get compensated for loss of life. But, at the same time, your hard earned money is for your family and loved ones to help them lead their lives in a better way - better education, better lifestyle, children’s marriage etc. Thus, just like you went about your investments with care, you would like it to be transferred to your loved ones smoothly.
Most of us put a lot of effort into our earrings and investments. Ultimately it is for the family, but we neglect how efficiently our assets transmit to them. Estate planning is as important as investment planning or any other aspects of financial planning. A holistic financial plan is incomplete without Estate planning.
Mimi Partha Sarathy
Sinhasi Consultants Pvt. Ltd.
Broadly, there are two scenarios for the distribution of your wealth after you.
1. Intestate Succession - In case, you do not have a WILL, the transfer of assets will be as per the Indian succession act and will be based on your religion. We have explained that more fully here
i.e. Indian Succession Act 1925, Hindu Succession Act 1956 or Sharia Law. But, practically the process is tedious. Getting a succession/legal heir certificate is not easy and inconvenient for your family members. Furthermore, the distribution goes EQUALLY to the Class I heirs EQUALLY even if you wish to pass on everything to your wife / Mother / Children. (Class I heirs - mother, spouse, son/daughter, son/daughter of predeceased son/daughter, widow of the predeceased son and few other such relatives).
2. Testamentary Succession - In case you have written a WILL, the transfer of your assets will be as per the WILL. Further, in many cases, probate of the WILL is sought for in order to transmit the assets. Although, probate of the WILL is not mandatory as per law except in the the provinces of Chennai, Mumbai, Kolkata, all financial institutions i.e Insurance companies, Banks, MF AMCs, Stockbrokers / depositories insist on probated WILL to ensure that the assets are transferred to rightful beneficiary. This has become the norm off late to avoid any disputes with third parties once the financial assets are transferred as per the WILL.
However, please note that irrespective of the WILL whether executed or not, your financial assets like Bank A/c, Demat A/c, MFs etc will be transferred to the joint holder/nominee/beneficiary registered in the respective accounts. The rightful beneficiaries in your WILL have to take necessary actions if the beneficiaries are different in your financial assets.
A WILL is a must – it is the stepping stone to Efficient Estate Planning, not a complication. A simple and clear WILL makes everything easy. Executing a WILL gives you the flexibility to distribute your assets as per your wish. It also provides financial security to family members. In some cases you may want to provide one or more family members more financial assistance due to their special needs or requirements; like a special child might require more financial assistance throughout the lifetime. It also reduces the legal hassles during the settlement of the assets and helps reduce costly legal expenses and any conflict between the family members.
As mentioned above, financial assets get transferred to the registered beneficiaries irrespective of the WILL hence, we suggest you make sure that beneficiary & nominees must be in place in all assets, second holder/joint holder to be registered wherever possible/applicable. Further, it is suggested to keep beneficiaries/ nominees as per the WILL in order to avoid any confusion/conflict later.
But, even though WILL & beneficiaries are in place, there should be clear information, given on the various assets to your family for them to refer, in order to start the transfer. You don't want your assets to get lost/ unnoticed/ remain unclaimed. At times even term insurance, public provident fund (PPF) or the National Pension System (NPS) are defeated. As of 2022– 50,000 to 90,000 crore of idle wealth remain unclaimed (as per various reports) with insurance companies, banks, corporate houses, post office and the EPFO.
There are a few best practices to follow for the smooth transfer of assets and to avoid unwanted hassles to those you leave behind.
|Insurance policies||Policy document|
|Bank A/c||A/c number, Passbook|
|Fixed Deposit||FDR Number|
|Mutual fund||Folio number, Registered mail ID & Mobile no|
|Equity Shares||Demat & Trading A/c Number|
|PPF, EPF, NPS||A/c number, UAN/PRAN|
|Real Estate||Registration papers, Khata number etc|
|Any business commitments, partnerships?||Descriptive details|
|Any hand loan to friends/family?||Descriptive details|
|Any Outstanding Loans?||Loan Papers|
|Any Litigations?||Lawyer's Contact Number|
Most IMP: Key contact person who knows about the above details like your financial advisor or respective relationship managers.
Other reasons for sharing this information are to make clear to them the way to access your investments in your absence. If this plan is done with the family, it allows them to use it when needed. We have explained it in detail Click here
In a nutshell, executing a WILL gives you peace of mind as you know that your assets are directed for the transmission the way you want it to be. Also, the transmission becomes smoother and hasslefree if beneficiaries and nominees are in place. A summary containing all your financial information allows your family member to access and use the money whenever needed, even when you are no longer around.