Importance of Will, Estate Plan and Nomination

Estate law, last will and testament in a court.

by Ranjith VM

You work hard throughout your life building assets with the hope of ensuring the financial safety and security of your loved ones. But what would happen to these assets in case of your sudden demise? Have you given a thought to it?

The laws related to inheritance are complicated without a Will and sometimes it can get ugly for your loved ones. So, estate planning, writing a Will and having a nominee will help ensure that the people you love get what you wish to give them.

Estate planning is about setting out how you want your estate (or your assets) to be managed and transferred. It is a more intensive process that considers all your properties, bank accounts, Provident Fund savings, investments, insurance plans, jewellery, and anything of monetary value. Writing a Will and providing power of attorney are usually a part of estate planning.

A Will is a legally binding document that lets you distribute and manage your properties and assets. It takes effect after your demise. The main benefits are that it provides clarity and prevents unnecessary delays in the transfer of your estate. If you have dependents who are minors, it can also spell out how they should be taken care of. If you have many financial dependents, without a Will, they could be left high and dry. For instance, if your parents depend on you for a regular income, not having a Will can cut them off from your money. A Will can also outline who takes over your business and how its proceeds should be divided after you are gone. 

The other aim of Estate Planning is to help minimise taxes in the event of your demise. Your heirs will be required to pay capital gains tax, income tax, etc., from the earnings on your investments. If your estate planning is done properly, you can help minimise the taxes they will pay. For instance, if you leave some of your money to charity, it can reduce the tax liability for your inheritors. 

Don’t let your money be ‘unclaimed’

Thousands of crores are lying “unclaimed” in forgotten and lost investments. There are unclaimed deposits languishing in dormant bank accounts, maturity proceeds of policies idling in insurance companies and even the life savings of individuals are locked up in inactive provident fund accounts, mutual funds and stocks. This could be because the owner lost track of the deposit or is deceased and didn’t name a nominee. This is proof of how important it is to have nominees.  

Proper nominations can provide a relatively easy way to transfer an account, investments, or insurance policy proceeds upon your demise. A nominee acts like a ‘Trustee’. The insurance, mutual fund or your shares will be passed on to the nominee, someone you trust, who can further help, in process of passing it to your legal heirs.

Where you can have nominations

A simple step of adding a nominee in the following accounts and policies will be helpful in the smooth transmission of your assets to nominee/ legal heirs in case of any unfortunate event in future.

  • Bank Accounts including Fixed Deposits
  • Provident Funds- Public Provident Fund (PPF), Employee Provident Fund (EPF), General Provident Fund (GPF), etc.
  • National Pension System (NPS) Scheme
  • Life insurance policies
  • Demat Accounts
  • Mutual Fund Investments

If you don’t have a nomination, your legal heirs will have to go through long and cumbersome procedures like producing the death certificate, proof of relation etc., to claim your assets. You can also have your legal heir as the nominee. At any point in time, you can change the nominee by informing the company concerned. If your nominee is a minor, you must appoint an adult as guardian by providing their name, age, address and relationship to the nominee.

Accumulating assets/wealth is important, but it is equally important to ensure that your inheritance is passed on smoothly to your heirs. Estate planning, writing a will and having nominations in place is ultimately about ensuring that the people you love get what you wish to give them efficiently. If you’re not sure how to evaluate your assets, seek help from a financial advisor. You can contact Geojit’s financial planning division – STEPS.

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