Have money, but no Will? Why that is dangerous

Wills and nominations are perhaps the most neglected aspects of financial planning, but their urgent importance cannot be overemphasised. Recently, a client passed away suddenly. I had helped him plan his finances and investments. His main focus was to protect his capital and make it grow. His objective was to enable his wife manage things once he’s gone. When this client passed away, I learned that I should have pushed him to attend to one small, but absolutely essential thing: choosing a nominee for one of his bank accounts.

His primary bank account had no second holder, nor was his wife a nominee. However, in all other investments, we had ensured that his wife be the second holder using “either or survivor” mode. Thankfully, we had his will in place. This, however, brings up two often overlooked aspects in financial planning: wills and nominations

How to make a will?

It can be made by anyone who is 21 years of age and of sound mind. It can be handwritten and on a plain paper. It doesn’t have to be on a stamp paper or in any particular format. All you need to do is list all your assets and name the person/(s) you want to bequeath each of them to. A valid will should be witnessed by two persons who are not beneficiaries under the will. To carry out the bequests, an executor must be appointed. It is a good practice to have the will registered to enable prompt distribution of the estate.

Please remember, making a will enables you to specify whom you wish to leave your assets, to upon your death. A will can be reviewed and amended when a significant event occurs in your life - marriage, children, divorce, death of any beneficiaries, addition of new assets, etc.
 

Usually people feel that if they have appointed a nominee in their investments, they do not need make a will, as it serves the same purpose. This assumption is incorrect. A nominee is just a custodian [in most cases], who will transfer the assets to legal heirs named in a will or as per succession laws. Having a nominee saves the legal heir the cumbersome process of producing death certificate or proof of relation, since the company is bound to transfer all your money/assets to the nominee.
Impact of appointing a nominee

For life insurance, real estate, mutual funds, bank accounts and Public Provident Fund (PPF), the nominee will be entitled to your money/asset as a trustee and will be legally bound to transfer it to the legal heirs as per will/or as per succession laws in the absence of a will. It is ideal to have your spouse as a joint holder in the property/MF/bank account and make your child/children nominee. As per Companies Act, nominee/(s) named in your shares/bonds/debentures will be the ultimate owner of those stocks/bonds/debentures. The succession laws on inheritance will not be applicable here. However, in case you have made a will, that will be the source of truth.

Chitra Iyar

(The writer is CEO of My Financial Advisor)

Source: DNA Money