Estate Planning: The To Do List


Financial Life After Death
Are you prepared for emergencies? Will your family know where your money is in case you are no longer around? It may be some ancestral land, bank fixed deposits , a demat account, mutual funds, insurance policy or even the money you lent to a friend. Maintaining proper financial hygiene is important so that your money ends up with the right person.
There are stories galore of the financial mess that results when the breadwinner dies. If the person does not have assets or insurance, it can cause financial distress to the family. It can be a similar situation when the deceased has assets but the family has no clue about it. So, even a wealthy family can get into trouble.
No wonder, there are thousands of crores of rupees in unclaimed accounts with various financial institutions. It happens not just due to the death of an account-holder. Even someone still alive can forget his/her own assets, especially if the investment was done years ago. Investments may undergo churning from one instrument to another, not properly recorded, remembered or shared with the family. It is said that money is difficult to maintain after earning it.
Does your family know all the sources of your income and liabilities (loans, etc)? Are your investments communicated to your family? Clarity regarding your finances for yourself and for your family is possible, if you have properly recorded all relevant financial details. What is not recorded is lost. Even financial software will not help here, unless there are proper and regular inputs.
Write Your Will: There may be various stakeholders for your wealth and their relationship with one another may not necessarily be amicable. There may be parents, spouse, children, spouses of children, brothers, sisters and so on. The dynamics of relationships keep changing and, hence, the paramount importance of making a Will, even if it is a simple handwritten one.
Once the Will is executed, all the nominees already registered will have to abide by the wishes of the testator (a person who has made a Will) and the assets of the deceased distributed accordingly.
Make sure the Will is updated, with changes in life situations. For instance, a man makes a Will when he is unmarried, leaving all his wealth to his only sister. He does not change it after he is married, has children, and dies in an accident. The sister may stake a claim to his wealth, leaving his widow high and dry.
If one does not make a Will, the assets will be inherited by the legal heirs in accordance with the laws of inheritance.
A Will needs to be clear and concise, leaving no room for misinterpretation. A Will is a simple document to be written in simple language. Preferably, avoid legalese. You simply have to give specific instructions about what has to be done with the movable and immovable properties you own and the property you might acquire in future. It would be best if it reads like a balance sheet. Just specify the property and the person. A Will should be legible and clear to understand.
At the core, it is a simple statement of your wishes. It must have your name, address, age and a declaration that you are in a sound state of mind. It must be signed and attested by two witnesses in the presence of each other and the testator (the person making the Will).  The law does not prescribe the form or content of a Will. It can be handwritten or typed on plain paper. And you do not even need a lawyer to make a valid Will. Further, a Will does not require payment of stamp duty and registration. However, when it comes to actual transfer of your assets, large institutions and share-transfer agents prefer to depend on the Will that is registered.
Having said that, it is important that a ‘homemade’ Will is legible and comprehensive. It must have a complete list of your assets and liabilities and details of their distribution in simple, straightforward and easy-to-understand language.
A Will is an essential component of your personal finance, especially since a lot of people have become wealthy, thanks to the rising value of their financial assets and real estate. Make a Will now.
Nominee: A person can be nominated to take charge of assets, such as bank accounts, MFs, demat, insurance and apartments in cooperative housing societies, by filling the prescribed forms. If there is a nomination for a joint account, the nominee gets access to the account only when all the account-holders are dead.
A nominee takes charge of the assets after the death of account-holders and acts as a trustee. A nominee can also be an heir, but not necessarily so. Most often, though, you nominate a person who you intend to make the beneficiary of your bank account, insurance policy or other assets.
What Is the Role of a Nominee? The financial institution whose assets/accounts you hold is bound to transfer them to the nominee. The nominee should transfer the assets to the beneficiaries as per the Will or to the legal heirs as per laws of inheritance, in the absence of a Will. So, the nominee should be someone you trust and is, usually, a legal heir too.
A nominee gets access to your assets by simply producing a death certificate and identity proof, without the process of obtaining a succession certificate, probate and going through other hassles. The idea is to get your asset from the financial institution to the person you trust.
Nominee versus Legal Heir: A nominee is not, necessarily, the heir or beneficiary and only has the right to receive the asset. But, nominating someone other than your heir would be a wrong step, as that nominee may take control of the asset and not distribute it to the legal heirs, even if you have mentioned it in your Will. Hence, you should nominate someone who you wish to give your asset to, after your death. So, do not nominate your business partner, or some relative, instead of your own legal heirs. You may end up depriving your own legal heirs of your money.
The financial account-holder does not transfer his interest in favour of the nominee. The Supreme Court (SC) has clarified that the nominee of a depositor in a bank does not get ownership of the money in the account, after the death of the depositor. The nominee gets exclusive right to receive the money lying in the account. It gives him/her all the right of the depositor as far as the depositor’s account is concerned, according to Section 45ZA of the Banking Regulation Act. So, a nominee is a trustee, not the owner of the assets. The nominee will only hold your asset as a trustee and will be legally bound to transfer it to the legal heirs.
For example, after the death of all the FD account-holders, the bank gives the nominee the right to receive the money in the account. If the nominee does not distribute the money to the legal heir, it can lead to a legal battle.
Update Your Nominee: Unfortunately, people are notoriously lazy about filling out the nominee column; even those who do, often, forget to update it, sometimes with disastrous consequences. There are cases of the wrong person getting the assets simply because the nominee was not changed when there was a change in the relationship between the person and the nominee. There are instances when a divorced wife or an estranged brother got hold of the assets because the nomination was not changed in an altered relationship.
Bank Not Paying Nominee? The Madras HC has said in a judgement that, in the event of the death of an FD account-holder, the money should be paid only to the nominees, even if there were rival claims by other individuals on the ground of being the legal heirs of the deceased. The legal heirs can obtain an interim order from the civil court restraining the bank from disbursing the amount to the nominee until the dispute over their share is sorted out. But the bank cannot stop disbursement of the amount, on its own, by citing rival claims.
There are cases when the FD account-holders were dead but the bank refused to give the asset to the nominee, even when there was no rival claim. The bank may ask for court procedure or probate. You will have to make a complaint and escalate the matter further, if needed.
If Nominee Is Dead: After a nominee’s death, the heir of the nominee cannot act as the nominee for your asset. If the nominee passes away before the nominator, a new nominee must be appointed. If the nominee dies after the death of the asset-holder, but before receiving the money, then, too, the nomination becomes ineffective and the money can be claimed only by the legal heirs of the nominator. If the bank account-holder, as well as nominee, is no more, the legal heirs of account-holders will get the funds.
Nominee for Property: The SC has ruled, in 1984, that “a nominee is a mere trustee with whom the (cooperative) housing society can initially deal, after the death of a member. All the legal heirs of the deceased member have a right of succession to the property of the deceased member and a nominee cannot exclude the other legal heirs.
A nominee is like an executor, who is entrusted to manage the property or the asset, as per the nominator’s wishes, after his death. But a nominee cannot sell the property, unless he is a legal heir.
Nominee for Demat Account: The rights of the successors prevail over those of the nominee—in connection with the shares of a company.
The HC has now reiterated that a nominee enjoys all the rights only vis-à-vis the company, but he does not become the owner of the shares/debentures so entrusted. A nominee is accountable to the legal heirs who can enforce their rights against the nominee.

Trust Your Family for Joint Accounts? Is your spouse involved in your finances or is unaware of it? Should you have joint accounts with parents or spouse? Each person’s situation is different; hence, there is no one-size-fits-all advice. You may have reason to be discreet and not have joint accounts. But you should still make your family aware of your finances.
When Joint Accounts Fail: Having a joint account with a family member is better than one with a member of the extended family. There is no guarantee that a marriage will last; but keeping money in the name of the extended family can be a much bigger risk.
The joint account-holders are liable for all the dealings in an account. Hence, joint accounts should be opened only with someone you trust. Even if only one person is putting money in it, the joint account still gives the other account-holder equal rights. If the relationship is in trouble, the joint account, too, can run into trouble. It can be marital discord, relationships between parents and children turning sour or siblings falling apart. The future is unknown.
One advantage of a joint bank account is ease in transfer of rights to the surviving joint account-holder, in case of death of the other. If you want your spouse or parents to be able to get ownership of your account after your death, a joint account works well, even if your Will makes no reference to it or specifies some other person to get that asset. So, generally, your joint account-holder will be given the reins of your account to the exclusion of what the Will specifies. It is useful to ensure your spouse’s, parents’ or children’s rights are safeguarded.
In the case of death of one joint account-holder, the surviving joint account-holder(s) get ownership of the account; the account (for example, an FD) can be continued till maturity at the same rate of interest without breaking the FD. It can help your spouse (or parent) to get all the accounts converted to their name by submitting a letter, along with a copy of the death certificate, to the bank to request the deletion of the deceased account-holder’s name.
Joint Account Demat: When the investment is in demat form with joint account-holders (say, with your spouse), it will need the signature and approval of each of the living account-holders while moving the investment. It is not like your joint bank account, which can be operated as ‘either or survivor’ or ‘anyone or survivor’, where the signature of one account-holder is enough. A joint demat account is easy to pass on to surviving holders, if any of the account-holders dies.
Joint Account Options: A joint account also helps if one the account-holders falls sick, or is out of station or unable to operate the account, for any reason. If you do not wish to authorise your joint account-holder to operate the account, the account can be made ‘Former or Survivor’ or ‘Latter or Survivor’. In this case, the spouse (or parents) will have access to the account only after the demise of the other account-holder. Depending on the financial instrument you invest in, you may be offered the following joint account options:
Former or Survivor: Only the first account-holder can operate the account. The second joint-holder gets the right only after the death of the first account-holder.
Latter or Survivor: Only the second account-holder can operate the account. The first account-holder gets access to the account only on death of the latter.
Either or Survivor: It is commonly used, when you completely trust the joint account-holder. Both account-holders can operate the account without requiring the other account-holder’s approval. It makes it easy to operate the account by one account-holder when the other is unavailable.
Anyone or Survivor: It is similar to ‘Either or Survivor’ except that the account is jointly held by more than two individuals. Any one of the account-holders can operate the account anytime.
Jointly: If the mode of holding is not mentioned, the financial institution may treat the mode of holding as ‘joint’ by default. It is a good option to help control the withdrawals from the account. It ensures that one account-holder cannot decide unilaterally; approval from other(s) is required. A transaction needs to be signed by all account-holders. If any of the account-holders dies, the account cannot be operated by the others. The proceeds of the account shall be payable to survivors.
Jointly or Survivor: It is similar to the ‘jointly’ option; the difference is that the survivors can continue to operate the account. There is also the option to have the proceeds of the account payable to survivors.
Keep Your Originals Safe: Have you recorded all your financial transactions, so that the family can easily get all the required information about your investments? Are important original documents, like bank FDs (online and offline), insurance policies, taxable/tax-free bond receipts, demat, MF statements, property documents, etc, easily accessible to the family?
Originals of Financial Accounts: Today, you may open an online FD and not keep a copy of the FD receipt. If your family does not have access to online banking, they may not even know you had made an FD online. Apart from online/offline FD receipts, keeping all other financial investment documents will ensure that the family knows where your money is invested. Allotment letters for tax-free or taxable bonds will help as proof of investment, even if these bonds are also held in your demat.
There are still cases of people holding physical shares instead of in demat form. Services are being offered for dematting assistance and guidance. These services even offer assistance for lost shares which means you pay for not having the original share certificates. It can get even more complicated when the lost shares are in the name of your deceased parents.
Even insurance policies can be in demat form; but you will have to ensure your family knows about the insurance demat which is a new concept. You may want to keep a copy of the demat account statement which will help the family trace your policies. Do not throw away any paper policies (after demat). Keep a copy of it along with proposal form.
Keep a photo or photocopy of your financial documents as well as other important documents (passport, PAN, driving licence, address proof, etc). You may even want to do routine backup of your computer and mobile data that has important documents as well as digital photos.
Originals for Property: Original property documents are crucial to prove your ownership. Everyone should keep copies of nomination forms, share certificates and other relevant documents because, many times, cooperative housing societies lose the forms. In case share certificates are lost, one must apply for issue of duplicate certificate. The moment a duplicate certificate is issued, the original ceases to exist.
Financial White Paper: Documenting your finances will mean creating a single document which details all your assets and liabilities. The recording can be on paper, Word document or even using finance management software. The idea is to inculcate financial discipline in by creating a ‘financial white paper’. Financial information of your portfolio is important in today’s changing and dynamic world. Your financial data should be kept in a safe place easily available to your family. You will need to create a new white paper, periodically, and throw away the existing one.
How Many Email Addresses? Keep only a few email IDs. Keep the email address for personal work and financial work separate. You may, or may not, want to share the password for your personal work email with your family members. You may, or may not, want to allow family members to access your personal emails.
For financial work, try to keep only a few (three or less) emails linked to banking, MF, demat and insurance. Your Will or financial white paper should give the password so that family can access the email linked to your financial institutions. Email companies may not easily share the password with family members, even after the death of the email address owner.
Access to Online Finances: Cybercrime is on the increase because of increased use of technology and its careless application.
So, recording your finances (white paper) for the family, updating them about your assets and liabilities, is important, but giving them access to online financial accounts can be avoided when you are alive. Your white paper will help them know your assets to approach the financial institutions. If the password is updated after creating the Will, you should update it in your white paper.
Is the Locker Safe? You may keep valuables (jewellery, original documents, etc) in a bank locker. If you are keeping important originals in the locker, make notarised copies and keep them at home or some other safe place. Make a list of the contents of the locker and make the family aware of it.
For jewellery, keep the receipts of purchase. If the receipt is lost, get the valuation of the jewellery done. It can be needed, if there is a locker break-in. You can take photographs of the jewellery as a proof of your valuables.
It helps to have a joint account for the bank locker. Nominate a person even if you have a joint account. You may keep the locker key with yourself during your lifetime; but work out a way for the joint account-holder to get it after your death. Banks do not keep a duplicate copy of the locker key and there is a hefty charge for getting a replacement key.
Your Tax Returns :Are your income-tax returns accessible to the family? You should keep a history of ITR submission copies. Your Will or white paper on finances can mention the login details for the ITR website. After someone’s death, the family needs to file returns in the year of death. After that, tax return filing is not needed.
After the death of a person, there is a need to complete the process of paying the due income-tax on the income of the deceased till his death. The legal heir has to file the return of income, along with payment of any balance tax due, to avoid notice to the legal heirs. If there are unpaid tax dues, the tax department can claim it from the deceased’s assets.
Tracing Unclaimed Accounts: There are thousands of crores of rupees in unclaimed money with the Employees Provident Fund Organisation, banks, insurance companies, post-office accounts, income-tax refunds, stocks and bonds, MFs, etc. The money in inoperative provident fund accounts with the EPFO tops, at over Rs.26,000 crore. Banks accounts, MFs, insurance, demat, post-office accounts, bonds and even property can be untraced if the owner does not make his/her family aware of it during his/her lifetime or in Will/financial white paper. They would need to check the bank account statements (if known) to see if there were any premium payments for insurance policy, debits for investments in MFs or equity, purchase of bonds, etc.
Unclaimed Bank Accounts: Bank accounts or deposits, which are inactive or inoperative for 10 years or more, are treated as unclaimed monies. The Reserve Bank of India has mandated banks to publish a list of accounts, inactive or inoperative for 10 years or more, on the bank’s website. These unclaimed monies can be maturity amounts of FDs which have not been claimed, money lying in inoperative savings or current accounts and so on. The maturity proceeds of unclaimed bank FDs will, usually, earn the savings bank interest rate.
Unclaimed Insurance: If there was any insurance policy, there may be a policy bond or photocopy of it somewhere in the house or locker. If all the member’s existing policies were from one insurer and through one agent, you should ask the agent if there are any other policies which he/she sold to the deceased person.
The amount payable as death claim, maturity claim, survival benefit, premium due for refund, premium deposit not adjusted against premium and indemnity claims that have remained unclaimed beyond six months are defined as unclaimed insurance amount. If there is an insurance policy with unclaimed amount, there is a way to check on the insurer’s website.
To know whether any amount under your policy is lying unclaimed, you need the policy number, policy-holder’s name, date of birth and PAN card.

Excerpted from a very informative article that appeared in Moneylife by Raj Pradhan.


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