5 Things To Have in Place For A Smooth Wealth Transfer

We all work really hard to make sure that we have enough savings, gain financial stability, become financially independent, provide for our family, and leave behind a legacy. One important part of our financial journey is to write a will & choose a legal heir. Most of the time, we put it off for a later date. But, with the amount of uncertainty in the world today, is it wise to put it off any longer?

Let’s look at an example. Mr. Vinoth, 45, was in a pensive mood. One of his close friends had recently passed away leaving his family in a state of confusion. This along with the recent pandemic has left Vinoth feeling thoughtful. He has had a good run in his career and has accumulated sufficient wealth to support his family, but he has not thought about estate planning. He wanted to keep a system in place to take care of his family’s needs in the future. Here are a few things to keep in mind when choosing a legal heir.

Understanding Why You Need Wealth Transfer

The first step in the process would be to clearly understand what your wealth transfer objectives are. This will enable you to decide how and when your beneficiaries will receive the assets and give you enough space to identify who your legal heir would be. In most cases, the legal heir would be your children. Drawing out a family tree would help you identify other related parties as well. This process becomes even more important when you have an ancestral property, as you cannot pass on your share of the property without a ‘go-ahead’ from other related parties. It is always a good idea to involve your family members/beneficiaries, to whom you want to transfer your wealth, early on in the process.

Identify Your Assets & Liabilities

• • • Catalogue all your assets – Include all your bank accounts, Post office deposits, PPF, NPS, NSC, and other government instruments, Physical gold, Sovereign gold bonds, and other commodities, Mutual fund investments, Equity shares, Real estate details, if you are a beneficiary of any ancestral property, and any other movable or immovable assets over which you have ownership.
    • List down all your liabilities – Include your mortgage loan, vehicle/personal loans, credit card loans, if you have any obligations which you have signed as guarantor, and if you have lent money to anyone.
    • Documents and passwords – Your beneficiaries must be able to easily access the above information. So, keep all relevant documents related to your assets and liabilities in a secure location and inform your spouse/children about the location. Also, maintain a digital locker or physical list of all your passwords and enable access to your family.
    • Nomination details – Make sure you have updated nomination/beneficiary details in all your asset documents. Remove any nominations which are outdated.

Talk About Insurance

• • • Life Insurance – Keep your policy document in a secure location along with your asset documents. If you have an e-policy, then take a printout of the same and store it in physical format. Inform your family about the policy benefits and details. Make sure the nomination details are updated in the policy.
    • Health Insurance – Give a copy of your health insurance card to your family member in case you fall sick/incapacitated they can claim health insurance cover. Keep your family informed of the policy details and whom to contact in case of emergencies.
    • Accidental Insurance/Critical Insurance – If you have taken any additional riders on your insurance policies, inform your family regarding the same.

Legal Documents Needed For Wealth Transfer

• • • A Written Will – Always have a written will in place. Make sure the will denotes that it is your “last and final will”. A will gives your beneficiaries legal ownership rights over your assets. Appoint a trusted person as the executor of the will and consult a lawyer in case of any legalities.
    • Building a Trust – You can also create a trust if you want to specify how and when your beneficiaries will receive the assets. This will give you more control over the distribution of assets and better security as trusts are created as separate legal entities. It is better to have a will in place even when you have created a trust, as this will enable a smooth transition of those assets which do not form a part of your trust.

Other Things To Do

1. 1. 1. Educate your family members about your finances. If your beneficiaries are not financially literate, they will not be able to manage the assets you leave them with.
      2. Keep a model portfolio in place for your family to follow, after your demise. Especially when they do not have prior exposure to investment avenues.
      3. Always think two levels down the line while planning for wealth transfer. (i.e.) plan for your spouse and children.
      4. Your financial assets, even unclaimed ones, cannot be forfeited by financial institutions. Your legal heirs can always reach out to RBI/other respective regulators to claim the assets back.
      5. Create at least one joint account with your spouse, this will help your spouse have access to funds in case of emergencies, especially in situations where you are disabled/no-more.
      6. If you hold real estate in your portfolio, take your spouse or family to visit the place, so they know the location of these assets. Maintain all relevant documents, as real estate investments are prone to legal issues in India.
      7. Revisit your wealth transfer plan at least once a year to make sure all your assets and liabilities are captured, and beneficiary details are up to date.
      8. Introduce your family to your financial planner, and legal advisor so they know whom to reach out to.