A person may have done proper financial planning and is investing accordingly to achieve all the financial goals. But along with investments, it’s equally important to have proper documentation and to ensure ready availability of the investment instruments at the time of need.
Otherwise, all the planning may not only go haywire in case of the unfortunate death of the investor, but also may deprive the dependents of the timely benefits due to lack of knowledge about the investments.
To ensure that the investor and/or his her nominee(s), financial dependents or legal heirs get the benefits of investments at the time of need, one should avoid the following mistakes:
Not sharing investment details
As life is uncertain, it’s important for an investor to disclose the location – where the financial instruments are kept – to the financial dependents.
This is because, after the sudden demise of the breadwinner, the first difficulty faced by the dependents is to determine how much investments (and even liabilities) are there and to locate the documents to claim the benefits and repay the liabilities.
Along with the financial documents, disclosing details of all the investments, their location and password to access the digitised instruments is also equally important.
To make things easier, note down all the investments, assets and liabilities. In case of physical investments, write down the location of the investment documents and in case of digital investments, write down the user ID and password and how to access the documents. Provide the copies of the list to the financial dependents and to at least one responsible person, whom you trust.
No, or improper nomination
Nomination is important to ensure that the financially dependents get the investment benefits timely without running pillar to post to get the cumbersome paperworks done.
In some cases, the beneficiaries may not get any benefit or may get a part of benefits in the absence of nomination or improper nomination even after having the required documents.
So, investors need to ensure that they don’t forget to nominate – be in bank accounts, fixed deposits, NSC, bank lockers, demat accounts, insurance (life, vehicle and/or property), PF Pension Forms or any other investments.
Many individuals start investing before their marriage and nominate their parents, but forget to change the nomination after marriage or after the death of parents. In such cases also, the financial dependents may face hurdles in getting the benefits.
So, along with nomination, updating nominee details, as and when required, is also important.
To make the things even easier and to avoid the possibility of any legal tussle, it’s better to make a will and get it registered.
Not taking insurance on loan
Apart from taking insurance covers on life, health, vehicle, property etc., it’s also important to take insurance on loan to ensure that the remaining EMIs are taken care of in case of demise of the breadwinner.
Many people try to avoid the insurance on loan to reduce the amount of equated monthly installment (EMI), forgetting that the life is uncertain and the financially dependent may even hand over the property in case they fail to repay the loan in the absence of the insurance.
So, it’s always better to take insurance on loan than avoiding it to reduce the EMI.