The Covid-19 pandemic has affected everyone adversely. Each one of us likely knows someone who passed away or has had a near-death experience due to the pandemic. Untimely demise of a friend/family member/colleague also puts our own mortality into perspective.
While you must take precautions and avoid getting infected, you must think through the various “What ifs” too.
WHAT IF something happens to you? Does your family know about your investments and insurances?
WHAT IF they don’t make a claim under your term life insurance policy?
WHAT IF your family CANNOT access your investments in your absence?
WHAT IF your family CANNOT manage the money properly?
Wouldn’t this jeopardize years of your meticulous investment planning? How does this affect the well-being of your family? Wouldn’t your family suffer?
How do you ensure that your family does not struggle to access your investments and insurances?
Well, you need to take care of the following three aspects.
(1) INFORMATION: Your family must know about your investments. If the family is not aware of your investments, they will not even try claiming them. And this happens. As of March 31, 2018, an unclaimed amount of over Rs. 15,000 crores amount was lying with insurance companies. While the information is slightly dated, this gives you an idea.
Remember, this is just for a limited set of insurance plans (traditional plans and ULIPs). For term plans, even the insurance company would not know since the claim is contingent. Apart from this, there are a whole host of other investments (MFs, bank FDs, small savings, etc) that may be lying unclaimed.
(2) ACCESS: Your family must be able to access such investments. A Will, proper nominations or the right holding pattern will help your family access investments faster.
(3) MANAGEMENT: Your family must be able to manage the money. Or else your work is undone if the family makes poor investment choices.
#1 What INFORMATION to share with your family?
Everything about your assets and liabilities. Here is the list of most common items.
- Your insurance policies (Insurer and policy number, Policy document, receipts etc).
- Your bank account details (Latest bank statement/passbook, account number)
- Bank Fixed Deposit details
- Mutual fund investments (AMC, Folio number)
- Demat account details (Broker, demat account number, portfolio)
- PPF (Account details), EPF (UAN), NPS (PRAN) details
- Real Estate investments (registration papers etc)
- Your businesses, partnerships etc.
- Any other investment (hand loan to friends/family)
- Loans (outstanding amounts, EMIs etc)
Sharing information about your liabilities is also important. Your family would not want to default on any of the loans. And that is where the proceeds from your life insurance plan should first go to. Moreover, if you have taken a hand loan from someone, you would not want your family to be taken advantage of.
#2 How to share INFORMATION with your family?
#1 The best is to involve your family (spouse, kids, sibling, or a parent) in your investment decisions. Easier said than done. However, the more involved they are, the more aware they will be. Not only will the access to investments be easier, but they should also be able to MANAGE money in your absence better.
#2 Prepare a physical folder for your investments and insurance data. Keep print out of your insurance policies and investment statements in that folder. On a regular basis, open the folder and discuss contents of the folder with the spouse (or a family member).
#3 Prepare a folder on Google drive, keep copies of all your investments and insurance related data. Share access with spouse (or a few other family members) or a trusted friend.
Your investment data will keep changing. Thus, keep updating the physical folder/Google data on a regular basis (say, every 6 months).
Not everyone is equally tech savvy. Do keep this aspect in mind.
In my opinion, use a multi-pronged approach. A physical folder/file is a must. Keep soft copies of policies and investment statements, along with an excel with the list of all the investments in Google drive.
Moreover, add a crisp document about how you want your life insurance proceeds to be used and how the investments should be managed.
There are good initiatives by insurance companies, where they have provided formats for listing down information about your finances. You can download The Little Book of Legacy from HDFC Life OR iCare booklet from Aegon Life.
These are editable documents. So, you can enter data once. Keep the document in Google Drive. Additionally, take a printout and keep in the physical folder. On a regular basis, keep updating the file with the latest information.
#3 Who to share INFORMATION with?
You might feel that your job is done if your spouse knows about it. Not really.
What if something happens to both of you together? And that is possible since you stay and travel together.
Therefore, it may help if you share this information with a couple of family members (kids, siblings, parents) or a trusted friend.
I understand you may NOT be comfortable sharing your finances with everyone. However, spend time in building such trust and relationships.
#4 Get your nominations right (ACCESS)
You are required to enter nominations for each investment. So, that is unlikely a problem.
Still, spend some time and ensure that the nominations are updated in all your investments.
You may also want to update nominations as you go through various life events.
For instance, before marriage, your mother or father might be the nominee in your account. After marriage, you might want to change nomination in favour of your spouse or kids. Sometimes, the nominee may expire before the investor. Such events too shall require nominee updation.
Improper nominations can cause family disputes later.
I usually ask my investors to open their investment accounts in Anyone or Survivor mode. This ensures that, even in the event of demise of one of the holders, the second holder can at least operate the account (bank or investment accounts). Easy to access investments in such a case. Note this approach has certain caveats. Since the joint holders have equal ownership of the assets, this approach can be a problem in case of separation or a family dispute.
#5 Consider writing a WILL
A Will describes how your assets will be distributed among your family after your demise.
Drafting a proper will is extremely important if you foresee your family fighting over your wealth. Even otherwise, this is an important succession document since it will list down all your assets.
Note, a nominee is merely a trustee who holds your investment until the legal heirs come and claim money from him. So, your job is not done with just getting your nominations right.
There are sample wills available online. You can find one on this link. You can fill in the details and sign the Will in front of two witnesses. However, to avoid any complications later, I would suggest that you take professional assistance from a lawyer in drafting a will. There are online sources such WillJini, where you can get professional assistance in preparing a will.
If you wish, you can get the will registered. You can share a copy of the will with legal heirs.
#6 Just accessing the investments is not enough (MANAGEMENT)
Your family can still mess up the finances, ruining your years of hard work.
Mis-selling is rampant in financial products.
Making money decisions is not easy. For someone who has never made any investment decision, managing a large sum of money is an insanely difficult job.
While the investments can simply be transferred to the family’s name and continued, the spouse/family needs to make a fresh decision about life insurance proceeds.
As soon as the life insurance amount gets credited to your bank account, expect a barrage of calls from the bank RMs. It is not difficult for the family (already under such emotional stress) to make wrong investment choices.
Therefore, pass your financial knowledge too, and not just your investments. Again, easier said than done, but you must try.
#7 If you work with a financial advisor
This is not to suggest you must work with a financial advisor.
However, if you do, you must share the details of your investment advisor with your family. Such details could also be put in the physical folder/Google drive folder.
And just sharing the details may not be enough, it takes time to build trust in money matters. Therefore, it will help if your spouse (or someone in the family) can be part of your discussions/meetings with your advisor.
If your spouse (or a family member) is comfortable with the advisor, she/he can reach out to the advisor and inform about the tragic event.
A trusted advisor can help in all 3 aspects.
He will likely have KNOWLEDGE about all your investments and insurance plans.
He can help your family not just in ACCESS(ing) your investments but also the MANAGE(ment) part.
There will be continuity in investment planning too.
Similarly, if you have an insurance agent, he can help your family with insurance claims.
Additional Links
Hindustan Times: What if I am gone…suddenly?
Now that you are here, please scroll down to read super comment from Ninan, where he shares his insights and experience. Very illustrative and useful.
6 thoughts on “How to Keep Family informed about your Investments and Insurances?”
The best article I have read for a long time. This article should be the foundation for each and every one. What is the point of working hard, saving money, sacrificing, and in the end the person for whom you did all this, cannot enjoy the same.
With regarding WILL, If you have decided to write one, please get a lawyer to draft the will, and get it registered. This is critical. It is pointless writing one and not registering the same. It would be better if you write your will in English. I had a property in Bangalore and my mother was staying in Kerala. My mother wrote the will in English instead of Malayalam and got it registered in Kerala. When my mother passed away, it was a breeze to get the property in Bangalore to be transferred to my name. In spite of English will, I did have to pay few thousand but this is normal I guess in India. Hence it is critical to have will in English if you have properties in other states.
It is not OK if you have given a nomination. Either keep the nomination paper with you or ensure that the Banking or Postal system has recorded your nomination. My mother was very finance savvy in her own way and knew the importance of joint account and nomination. She had deposits with Post Office and made sure all her deposits had nomination. The shocker came when I went to the particular post office and submitted my mother’s death certificate. He says nomination is not registered in the system. Can you believe this. The FD was opened many years back when post office was mainly manual, since then it got computerised and some jackass did not bother to load the nomination details. I had no copies to prove and the Post Master says, the system does not have the nomination. However, the man knew my mother well and he took efforts to go to Head Post office and dug all the achieved papers and they found the original nomination paper signed by my mother. God Bless this postmaster as he did this for my mother. How many will do this. So it is critical not to just think you have done your nomination but important to check in the system or passbook that the nomination is recorded.
Lockers – Do let your spouse know which branch and bank you have maintained your lockers. It would be a herculean task for a non-savvy housewife to search for this and the Keys of the Locker where you have kept. Ideally, put your wife name in the Locker system as well.
Account Number – If you are multibanked, it is critical to have all the account numbers, bank names, branch addresses written down, and others knowing this.
It is critical that real estate papers are kept in order in a file – There are many certificates that these guys issue, Like in Bangalore, you have Katha, encumbrance certificate, betterment charges slip, tax paid slip, and whatnot. When you are alive, please put some effort and keep all the documents in a neat and orderly fashion. If you are keeping the property papers in lockers, take a copy of the entire thing. My friend lost all his papers during the flood in Tamil Nadu. Water seeped into the locker and you can imagine what your plight will be if you go to Lands Department without any copies.
Finally thank God for shares being in demat form, your can give your spouse the password and user id and she can sell the shares and get the money in the account if there are issues. Hope this should not happen.
Finally I leave with a comment which one wise man said.
No point doing complex financial transactions if the inheritor of wealth is a simpleton and not too savvy in these complex financial products.
Regards
Ninan
Thanks Ninan for sharing your inputs and experience in such detail!
That’s one comment that is better (and more comprehensive and illustrative) than my entire post.
Very useful article!!
Must read for everyone . well articulated
Very good read! I am going to do this right away and for my parents as well!
Excellent Article by Deepish Sir and just want to add one more point. Please give the UserName and Password to your Spouse (If possible to KIDS too when they have become adults) of all investment accounts so that they all are aware to take forward th investments forward once they depart. Thanks