Copied from NSDL Newsletter for Investor Education - September 2022 -
This article is written by Mr. Vivek Law, Founder - Money Paathshaala
Perhaps the most under-rated aspect of financial planning is estate planning. This means your effort to effectively pass on your wealth to your family or any other individual or entity in the event of your death. Making a will and providing nominations in your financial assets, is a must. One of the most important aspects of financial assets is the ability to put a nominee and in the event of your death your money is seamlessly transferred to your nominee even if you have not made a will. This is applicable to all financial assets but is most effective in stocks or mutual funds.
In the earlier years, when there were paper share certificates, many family members would struggle to find these after the death of the person who had invested. The process of then transferring them into their name was long drawn and tedious. This has resulted in thousands of crores of rupees worth of shares and dividends on them lying unclaimed. While 25 years ago, NSDL did away with the need for paper share certificates, even now people are reluctant to put in place nominees, prompting the market regulator SEBI to step in and insisting that either you put in a nominee or explicitly state that you do not wish to nominate by March 31, 2023.
Now that you can even dematerialize your mutual fund units and keep them in your same demat account for shares and other instruments, your nomination can be done at one single point rather than making changes at each mutual fund level. Covid taught us the fragility of life. Most of us saw near and dear ones going to a hospital to never come back. Their families are still struggling to get the investments transferred in their name. So if you want your family, for whom you started investing in the first place, to be financially protected in your absence, please ensure you put your nominations in place and make a will.
My take: Fully agree, this is the most under rated aspect of financial planning. Day in and day out, people are out there to invest, trade etc to make money - they take Insurance policy etc, but fail to tell their family where the documents are kept or that they even have taken a policy. What is the point of taking a policy…
My own personal experience was that of my mother having done nomination at post office SB account, on her death when I went to claim the money in the account, the post master says there is no nomination and asked me to get succession certificate. Now, I am sure we had done nomination, but there nothing on record. Gods grace was with us as we knew the postmaster who personally went to the HO and dug up all the manual records and he was able to trace the account opening and nomination form. The reason being, account was opened prior to computerization and when the data was updated, nomination was omitted at their end but the onus is on us either to keep a copy of the record. They just give up.
Now that everything is digital, still it is better to take screen shot of the nomination recorded and keep it with you. You never know…