Simplified Laws Guide to Taxation and Legal Concern Mr. Ramakrishna aged 52 years, expired in June this year due to Covid. He is survived by his wife, 2 kids (one of them is over 18 years), and aged parents. He has left an Insurance Policy of Rs.2 Crores, Bank Deposits worth Rs.75 Lakhs, Mutual Funds and Shares worth Rs.50 Lakhs, Provident Fund worth Rs.20 Lakhs, a flat at J P Nagar, and a site at Banashankari. No WILL was executed and now the family has no clue of how to claim these assets.
Where there is a WILL, there is Only One Way! Distribute the wealth as detailed in the WILL document. No WILL, many ways. (Learning # 1 – Those who have wealth and have crossed a certain age, say 40 years, should make a WILL without fail)
When there is no WILL, the assets have to be distributed among the legal heirs (wife/spouse, children, and parents are legal heirs of the deceased). For Financial Assets such as Bank Deposits, Mutual Fund and Insurance, there is a provision to mention the Nominee. (Learning # 2 – Nominees are not the beneficial owner of all financial assets. They are the trustees or custodians of assets)
In Ramakrishna’s story, after his demise, like in any family, a subtle discussion takes place among son, wife, father, and mother to decide– basically to arrive – who gets what and how much? Let’s understand the position w.r.t. each asset.
In the life insurance policy, Mr. Ram nominated his wife as a beneficiary. Parents were curious to know whether they can get a share from Insurance money. (Learning # 3- As per the Insurance Act, the nominee is the beneficial owner. Therefore, in Ram’s case, the parents can’t get any share from Insurance money)
Coming to the Deposits of Rs.75 Lakhs in Canara Bank, the wife is the Nominee in the accounts. The banker has transferred the amount to the wife’s account. Can parents get a share from this? (Learning # 4 – As per the Banking Regulation Act, the nominee will get the right to receive the money but not the ownership. So, in Ram’s case, the parents can get a share from Bank Deposits even though the amount is transferred to wife’s account)
The next one – money in Public Provident Fund and his wife is the nominee to the account. Can parents get their share? (Learning # 5 – As per the Government Savings Promotion General Rules 2018, the Nominee can be either a beneficiary with absolute and exclusive right of ownership or a trustee for the benefit of legal heirs of the account holder. In Ram’s case, one has to see whether he has conferred ownership rights to his wife while assigning the nomination)
Then comes the money in Mutual funds and Shares in the Demat account of ICICI Direct. The nominee of the Demat account can only act as Trustee and won’t get any ownership rights (Learning # 6 – Nominee can’t take it all, the parents can get a share from this source)
Last one – A flat and a site. The immovable properties will be transferred to the legal heirs. There is no nomination facility for a flat / plot. Based on the legal heir certificate or succession certificate the title deeds of the property will be transferred.
So, what is the learning? One, fill nomination details wherever applicable, conferring ownership rights wherever permitted. Two, make a WILL This will reduce unnecessary tension, misunderstanding, and mental torture among the surviving members of the family.
After reading this, I am sure most of you will do your homework this weekend. My only request is – Let josh remain till you fill all the missing gaps in documentation.
Stay safe and live long.
