Unplanned and unprepared death

Death is certain; date of death is not certain! So, one can’t have a planned death. What is possible is ‘planning’ in case of death! One of my clients passed away recently. He was one of the 4 shareholders (and directors) of a private limited company. The surviving directors met me to understand the next course of action. They were telling me that the death of their colleague was so sudden and unprepared by all.

In this context, I wish to suggest the probable actions which can be taken during the lifetime of an individual.

Suggestion # 1: Nomination facility

• Many savings instruments such as Savings Bank account, Fixed Deposit, Demat account, mutual fund accounts, provident fund, etc. have a feature called ‘nomination’.
• Nomination is a facility that enables an account holder to nominate an individual, who can claim the proceeds of the deposit account, post his demise.
• The benefit of nomination is that in the event of death of an account holder the Bank/institution can release the account proceeds to the nominee without insisting upon a Succession Certificate, Letter of Administration or Court Order.

Suggestion # 2: WILL

• If one has assets – movable or immovable, he can decide during his lifetime to whom these things should go, after his demise. All self acquired wealth can be given to all the legal heirs or only to selected legal heirs/people (say only to wife or only to wife and one son or only children or charity etc). So, we suggest those who have assets may write a WILL and get it registered at Sub-Registrar’s Office.
• A WILL in place can solve any future disputes which may arise on account of distribution of wealth of an Individual after his demise.

Suggestion # 3: Partner of a Firm

• If an individual is a partner in a firm where 2 or more people are involved, it is advisable to pen down the future of the firm on demise of one or more partners.
• The probable questions which may arise after the demise of the partner are (a) whether one of the family members of the demised partner is inducted as a partner? (b) Whether goodwill to be given for final settlement of demised partner’s share? (c) Whether the family will get sustenance allowance after the death of the partner? Etc. These issues can be addressed when all the partners are alive and can be documented in the deed.

Suggestion # 4: Shareholder/Director of a company

• Similar to partner in a firm, the shareholders of a closely held company (private limited) can document the future course of action after the demise of one of the shareholders.

Suggestion # 5: Term and health Insurance

• Suppose, an individual is earning Rs.1 lakh per month, he may have to take an insurance of say, Rs.1.20 Crores. In the event of unforeseen and untimely death of the bread winner, the family can get a decent corpus and the interest earned thereon should be sufficient to take care of the family needs. Money can’t reduce the emotional and physical presence of the person, but it will help the family to have a stable financial independence. The traditional policies will suck away huge amount as premium, so we suggest one to go for ‘Term Insurance’
• Similarly, critical illness will take away a large amount of money out of one’s savings. So, it is advisable to obtain health insurance cover.
• Spend a good amount of time to understand different features of the policy and its advantages. Don’t be negligent or careless when the insurance agent explains the features of the policy. Go for the best policy.

Suggestion # 6: Discuss with spouse/legal heir

• The spouse should be made aware about one’s assets and liabilities
• The place where the original documents pertaining to the assets are kept
• Introduce one’s advocate or Chartered Accountant to the spouse
• Brief the spouse about the future wealth management, in case of untimely demise.
• Share the passwords with the spouse.

Suggestion # 7: Do it today

Last but not the least, there is nothing new in the above suggestions. Most of us are aware about it. So, most important thing is to implement it. That is where many of us fail! Fail to execute! Let’s have a strong will power to execute the above suggestions.

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