Why Your Family Should Know Where Your Money Is? : The Prudent Investor

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This pandemic has taught us all many, many things. It has taught us to be self-dependent in so many ways, at home for example. It has given us some wonderful lessons but some unpleasant experiences as well. By now, we all know family, friends or acquaintances who have been infected or worse, didn’t make it through.

Though death is an unpleasant reality to discuss, it sometimes has to be. In the situation where the breadwinner of the family passes away, it is critical for the remaining family members to be aware of the financial assets and to have access to these. Sadly, unclaimed amounts as per the IRDAI (Insurance Regulatory and Development Authority of India) as on March 31, 2018 stood at Rs 15,166 crores.

Money Invested but Family in the Dark

It is so unfortunate that in the majority of families, the breadwinner is the sole decision maker with regard to financial investments and the other members are not even aware of the investments and insurance policies. When required, they may not be able to access it thereby wasting all the effort to accumulate and grow that wealth and leaving the grieving family in a financial soup.

Our wealth is scattered across many accounts, having multiple investments and income streams is a great thing but keeping track of it is a major pain point for most people. No one can claim for an insurance policy which they don’t even know exists.

It would be terribly unfortunate for the family to be unable to access the family’s wealth after someone has worked so hard to earn, save and invest that nest egg. To prevent all those efforts being futile, family members have to updated.

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How does one go about doing this?

Create A Family Emergency Folder

This folder is a simple tool to help you organize and keep all of your most important financial files and documents in one place. These include critical financial documents, bank account information and passwords, as well as key estate planning documents such as your will, power of attorney, health insurance documents and any life insurance policies.

You can keep a physical folder or a digital folder online. Keep in mind how tech savvy your family members are and what would work for them as well. Here are some examples of documentation that could be included in your in case of death file:

  • Will
  • Life insurance policy
  • Bank and credit card accounts
  • Loan documents
  • Property deeds
  • Locker Keys, Duplicate Car Keys, etc
  • Account and device passwords

After making your emergency folder, make a note in your calendar to update it every six months. Once it is ready, let your loved ones know that it exists and where it is kept.

Write A Will

You can draft a will by yourself or hire the services of a professional. Wills can be made by anyone who owns any large or small property like an apartment, a bank account, an insurance policy, stocks, a provident fund, a postal deposit, etc.

Source: www.myadvo.in/blog/how-to-make-and-register-a-will-in-india

Why Make A Will?

To ensure that your assets are distributed as per your wishes and not about the laws of the land depending on your religion.

Common Mistakes to Avoid while Drafting a Will:

  • Not being specific about the assets.
  • If there are changes in the status of assets, not making the necessary alterations in the Will.
  • If you are making a new Will, not making declarations to revoke previous Wills made by you.
  • Appointment of any interested party as executor.
  • Not appointing a guardian for minor children.
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Veer, a Hindu man, is the owner of a bank account, mutual fund schemes, stocks in some listed companies, and one residential apartment. He also owns a life insurance policy and his wife is the nominee in the policy. Veer has assumed that, since he has named his wife and mother as the nominees for various properties that he has, the succession of these possessions shall come to pass as per the nominations. Is his assumption correct?

Unfortunately, it is not. The nominee will receive and hold the property of the deceased until he is legally bound to transfer or distribute it to the legal heirs of the deceased.

If you thought that your nominee will get all your assets and money easily and legally after you leave this world, double check yourself. The rule of the land does not let this happen in each and every case. Simply because in the eyes of the law, a nominee is only a custodian and not the owner of your assets, and is legally bound to transfer the assets to the legal heirs. So it is crucial to ensure that an individual, despite making nominations, also creates a will.

Improve Your Family’s Financial Literacy

Schedule time for you and your spouse to evaluate your financial picture. You can begin by taking an inventory of your family finances: income, expenses, debt, and investments, if any. It’s a good idea to make a habit of doing this every six months as your financial picture changes or so it stays fresh in your mind.
Also, teach your family about the basics of personal finance so they have atleast a basic understanding of their assets and liabilities and how to manage and grow their wealth. Introduce them to your financial advisor, chartered accountant and lawyer, if any.

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The responsibility of an individual towards securing the financial well-being of their family does not end with the purchase of a policy or by paying the premium. Becoming actively aware of the intricacies of the policy documents, keeping family members informed, maintaining thorough documentation internally and updating the information to the insurer goes a long way in preventing one’s hard-earned insurance policy from remaining unclaimed.

To conclude, your responsibility as the breadwinner doesn’t just end at earning an income and saving for your family. Keeping your family members in the loop and very well informed about all investments will prevent your financial assets going unclaimed in the case of an untimely demise.

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