ET Wealth | 8-pt plan to pass on assets to heirs

To our shock and dismay we found that a recently deceased friend held all his assets in his sole name. The distraught wife who is still coming to terms with her loss will now have to run pillar to post trying to get her entitlements and benefits. She has to begin with establishing that she is the legally wedded spouse. When people argue over one investment or another, spending immense time making that decision, I so want to ask if they have given the same attention to what happens to the money after their death.The sad reality in many homes is that there isn’t even an easily accessible list of assets. There are insurance policies that the unexpected death should trigger; but beneficiaries don’t even know these exist! Death is tragic when it leaves behind people who don’t have the knowledge, influence or the power to access assets that are rightfully theirs. We have seen young fathers pass away without changing the nominees in their PF accounts, leaving the hapless wife at the mercy of in-laws who don’t care much any more.Many think that there is some major process and paperwork involved or that costs might be high. There are simple things to do to make sure your assets are secure should anything happen to you. Make it a point to complete this task.First, make sure you have a record of all your assets: Your bank accounts, insurance policies, demat accounts, mutual fund holdings, bank lockers, property, land, jewellery and gold. The very rich have family offices to manage this. The rich may have their accountants. The others might have to do it themselves. Trust me your list isn’t as long as you think. A small diary or notebook is adequate.Second, make it a practice to hold your assets jointly. The first holder can be the one who is funding the asset and therefore, gets all information, enjoys the tax benefits and operates the account. The second joint holder is only the namesake. But you choose your spouse or child or whomever you wish owns the asset if you are no more. This is the easiest and most hassle-free way to pass your assets on. No court, no probate, no fee, no tax. Just the production of the death certificate is adequate to pass the asset to the joint owner.Third, make sure you have nominations in all your investment accounts. In case something were to go horribly wrong and both parents pass away unexpectedly, your children who are nominees in your investment accounts can claim it. If there are multiple nominees they can get a share as you may stipulate. Your nomination is adequate for the institution concerned to pay the person the settlement as due.Fourth, do not mindlessly pile up real estate assets. Especially if your children do not live with you or in the same city or country. It is a big bother trying to maintain, rent or sell property remotely. It is also a chunky asset with so little flexibility. Many such assets just move from one generation to another, without being registered, stamped or modified or ever sold. Imagine a valuable asset not enjoyed by anyone who owns it. Do not presume that property is a great thing to leave behind for heirs, unless you know they would actually live in that very house.Fifth, consider gifting as a valuable option to pass over your property to your immediate and extended family. The long list in the Income Tax Act, which does not tax gifts made to specified relatives and on specific occasions like marriage, offer the scope to pass on assets to those other than legal heirs in an easy manner. Unless you are gifting an immovable property, no registration or tax is involved. You can liquidate your investments to make a gift and in many cases, third party investments are permitted.Sixth, do not assume that writing a Will is the only option to manage your wealth after your time. A Will is not a complex document to write. It can be made even on plain paper, listing the asset and whom you like to bequeath it too. As long as it is signed by you and witnessed by two others to evidence that you were able and willing while writing it, it is a valid document. However, to use a Will to access assets that are not in their names, your heirs and those mentioned in the Will must get it probated. Probate is a legal process that establishes that the Will is the last and undisputed piece of legal documentation evidencing how a testator wants their assets to be divided after their death. A court will have to do this. It takes six to nine months and a considerable cost. The charges are a percentage of the assets and can vary from state to state. Make a Will if you must. But be aware of the costs and hassles.Seventh, know what happens if you don’t indicate your preference about bequest. There are specific family laws that apply for every community, and who can claim your assets is as per the list therein. If you have not made arrangements for your spouse or child to get your wealth easily by making them the joint holders or nominees or gifting your assets to them in your lifetime, or writing a Will naming them, they have to begin making their claim, by applying for a succession certificate that establishes them as your legal heirs.Eighth, several tools in estate planning such as the creation of trusts are available. These involve processes, costs, involvement of specialists. They can be used when you have special situations and need more sophisticated approaches.In the simpler world, we occupy, where you have created assets so your family can enjoy them, make sure you have them included as joint holders and that you have nominated them. To those that aren’t legal heirs, gift and give away in your lifetime. Make that list of assets. Keep it simple.(The writer is Chairperson, Centre for Investment Education and Learning)

from Economic Times https://ift.tt/2ZWsboW