“The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time.”
– Mark Twain
While some of you may disagree with the quote above, the truth is death is as much a part of life as birth. All things come to an end one day, including our lives.
Oftentimes, when people pass away, their families are left clueless about the entirety of their savings, investments and other assets – especially if the person who passed away was the key financial decision maker. Sorting these out can then become a mammoth task that takes months to complete. This can add further stress over and above the emotional strain of losing someone. Many times investments remain unclaimed too, simply because the family did not know of their existence.
But if you plan your finances right, and follow the advice listed below, you can ensure that your family can carry on with little or no added trouble.
First and foremost, get yourself a term insurance plan and add your close family (spouse, children, parents, siblings) as beneficiaries of the same. The policy sum assured should be adequate enough to keep your dependents financially comfortable.
One thing you must keep in mind though when purchasing insurance is that you must never mix insurance with investments. Term insurance is the least expensive way of ensuring your family is suitably covered. In the case of your demise during the policy period, the sum assured will be transferred to your beneficiaries. Term plans do not give you bonuses or any sort of money back at the close of the policy period. They pay only in the event of the death of the policyholder.
There are other life insurance policies – endowment plans, money-back plans, whole life plans – which guarantee some sort of return or additional bonus to the basic sum assured. These policies are sold as ‘great mixes’ of insurance and investment. But such plans usually have low returns, with long lock-ins and are difficult to exit before the policy matures. In terms of the premium you’re paying, you neither get a great insurance cover nor a great investment return. A term insurance policy delivers the maximum sum assured for the least premium.
So, if you do want to get insurance and investment for your future, just get yourself a term insurance plan for the former and start investing in mutual funds for the latter. And remember to increase the policy amount in line with your salary increments and your lifestyle changes.
A nominee is usually a ‘trustee’ who must distribute your assets to your legal heirs as per your will or the applicable succession laws.
Appointing nominees makes the task of transferring your investments or insurance sum much easier. Be it your bank account, your mutual fund investments, or insurance, all of these can be easily transferred with the help of a death certificate and the nominee’s identity/address proof. Once that’s done, the nominee will transfer your assets to the appropriate beneficiaries.
If you don’t appoint a nominee, the transfer of assets could become a tedious process. Your legal heirs have to submit proofs and documents such as proof of relationship, your will (if there is one), among other things to ensure the transfer of your assets to them.
Prepare your will
A will is a document that lists out the assets you own and the people to whom you’d like to pass them on. It helps in determining who gets what and simplifies the process of distributing assets to your loved ones. It is important to have a will even if you’ve appointed a nominee as, for all assets, the nominee is merely a trustee who must transfer these assets to your legal heirs.
Having a will makes this process easy. If you do not have a will, your heirs will be decided as per law and your assets will be distributed accordingly. This can be a long-wound process and could even result in disputes.
Sort out your documents
Make sure you sort out all your financial documents and keep them safe, in a place that’s accessible to your spouse and/or a family member (or a trusted friend). Make sure you’ve listed all your liabilities (loans, credit card dues, etc.) as well as the list of people who owe you money (if applicable) and keep this information with your documents. Having all your information in one place will make it easier for your loved ones to access them and to ensure everything is in order.
Keep your spouse informed
Always make sure your spouse (or a close family member) is aware of all your financial decisions, documents, insurance, and investments. Ideally, they should also either know all your email, bank, and investment-related login details or know where they can find them.
You could also share this information with your children, or other people you trust, in the unfortunate event that you and your spouse pass away together.
It is also helpful to have a joint account with your spouse, especially in your old age. Having a joint account ensures that your spouse can still use it to issue checks and make payments until they get around to closing it and opening a new one.
Last, but not the least, make sure you get around to doing all this at the earliest, as it is always better to be prepared for whatever turn life may take.
This will ensure that in the sad eventuality that something happens to you tomorrow, your loved ones will be well prepared, at least financially, to deal with your demise.