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Have you planned for your parents, Girls !!

Have you planned for your parents, Girls!!!

Let me be very honest, I was never an expert on estate planning or retirement planning. My financial planning expertise was dealing with new bees like me. For my workshops, I started reading a lot and I found this very interesting article that Harsh had preserved since 2009 on Estate Planning, It quoted as under:

“According to Hindu Succession Act, if a Hindu male dies intestate (without making a will), the property is first passed to class 1 heir which include the deceased person’s widow, children, and mother in equal share.” I thought this is pretty fair, the mother, wife and children can all manage easily after the death of the son, everyone is given a good equal standing.

It continues “However, in cases where the ownership is in the name of a woman, her husband and children become equal shareholders of the inherited property upon her death. In cases, where none of them are present, the property can be claimed by her husband’s heir.”

Before I write further about my feelings and research on this topic, please note the following:

  1. I am not a Femi Nazi, I definitely believe in equal opportunities if not equal rights.
  2. We are 2 daughters in the family (i.e. no male sibling to take care of my parents after us).
  3. I have earned and built a decent portfolio of my own before my marriage and my husband’s involvement (and so has he). We both have an individual financially independent life.
  4. All the views are my personal, I am stating laws and its interpretation as per my understanding, I do not wish to ruin anyone’s marriage or any other relationship.

As you may understand, I was pretty shocked by the above language of the law quoted in the article and with very high hopes started researching on HSA has to know more about the inheritance of women’s property in today’s time.

There has been an amendment in HSA, which now states that, property of a female Hindu dying intestate shall devolve on the following persons:

Firstly, upon the sons and daughters (including the children of any pre-deceased son or daughter) and the husband;

(b) Secondly, upon the heirs of the husband;

(c) Thirdly, upon the mother and father;

(d) Fourthly, upon the heirs of the father; and

(e) Lastly, upon the heirs of the mother.

So the law means that if I die (a married woman with some property of her own), without making a will, firstly my property will go to my children. Currently, I have none, so the property will go to my husband. If me and my husband both die, then it shall go to my husbands’ heir (i.e. his parents) and if they are also not there, then it shall go to my parents.

Hence, my parents have the right to my property after my children, my husband and my husband’s heirs.

After knowing this law, I am personally noting down my own will or a plan in case anything happens to me intestate.

  • Some may say, I have an insurance, why do I need to put a will, intestate property includes my insurance money as well. So I have nominated and put my parents as the receiver of my life insurance on my death.
  • I have made a list of assets I acquired pre-marriage and have nominated, appointed my mother and father as the joint holder of the same. I might actually pen down a will very soon.
  • All the assets that I am acquiring post my marriage, is to split in the ratio of 60:40, with 60% devolving with my parents and 40% with my husband and his family.

These are just a few points that I am doing to ensure my responsibilities towards my parents are fulfilled financially even after my death and that my husband is under no pressure to take care of anyone.

Some people may still believe that I am being a feminist and this law may work against the hard work and efforts a husband and his family put on the wife to help her build her own assets. I do not wish to undermine any effort put by the family as a whole. It is very important to know what the law states about the right of a woman. Each situation and a family relationship has to be viewed and analyzed separately before a will is made.

Times have definitely changed and from owning a house to building wealth, the female has an equal stand in both her families and she is equally responsible to her both set of parents. Until girls with no male siblings take steps like these to ensure that their parents are self-sufficient, no parents would kill to have a male child.

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Common Nomination Mistakes that you must avoid

We have listed below the common nomination mistakes that people make and how should one avoid making them. Not informing the nominee –This may sound very basic but at many families, the wives and children are not involved in the financial matters of the house. Not informing the nominee about his/ her nomination and the details of the policy is a major mistake that you can do as a policyholder. The insurance policy is taken to secure your dependents and if they are not informed of the same, it does not serve its purpose. Generally, the insured is reluctant to inform the nominee because of insecurity or just carelessness. Such an ignorance will deprive the family members of the financial support that they would receive from the policy. Not updating nominee details –This is due to laziness and ignorance. Avoiding to update details is as good as not nominating someone. Another problem is not revising/updating the details of the nominee periodically like his address, age (minor to adult), status etc. If the nominee dies before the policyholder, it is very important to change the nominee details immediately. The policyholder has the right to change the nominee and his/her details any number of times during the term of the policy. Appointing Just One Nominee –Generally while entering details in the policy form, many of us mention just one nominee even after having more names in mind. It can be because people do not know they can nominate more than 1 person. Where the nominee dies before the policyholder and the details are left unchanged, there can be severe delays and rejection in receiving the claim money. As a policyholder, you must state more than one name in the nominee column with some defined percentage or the order in which the nominee should receive money. Remember to enter genuine details like full name, address, and relationships with the insured. You can also appoint successive nominees in your insurance document. This is considered the most advisable method of nominating. Appointing a nominee under 18 without an appointee –Prefer a major person instead of a minor so that one does not require having any appointee in such a case. If there are circumstances where it is compulsory to mention a minor as a nominee then it is advised to offer genuine and complete details of the appointee which includes his / her name, address, relationship with nominee etc. And the appointee is in charge of the minor until he/ she turns 18. Having Wrong Notions About Nominee Rights : Most of the people have a preconceived notion that a nominee has absolute rights. This is not true. If the nominee and the person to whom proceedings are bequeathed in a Will are not same, then a priority is given to the provisions of the Will over the rights of the nominee. In case a policyholder wants to give absolute rights to his/her nominee, he needs to prepare a Will and mention the beneficiaries thereof. It’s better to be cautious and have clarity on these matters in advance to assure financial protection of your loved ones.
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Why should you draft a will?

There are many individuals who have made appropriate investments for their family’s well-being, insured their life with a term-insurance rather than an endowment plan etc. However, they are wary of writing a will or feel that they should write a will after they cross a certain age.

I discussed with my parents and was trying to reason with them on writing a will. I even offered them to keep it anonymous and get a third party lawyer involved. In spite of the same, they were not very convinced on writing a will. The root cause of this problem is our ancestors and our previous generations who have been very conservative and conscious about their family wealth. They never wrote wills as they were scared that their children will not take care of them in their old age. The same mentality may be passed on to some individuals today. However, we must have faith that we are better than that and our in better financial position than our ancestors.

Making Nominations & Its limitations

This is the simplest way of ensuring that one’s assets i.e. saving accounts, fixed deposits, provident fund etc. are transferred to your dependents at no additional cost. However, it is very important to review your nominations from time to time as your relationships keep changing. You may want to edit your nominations when you get married, when you have children and when your parents/others (who are nominated are no longer alive) etc.

There are a few limitations/conditions to note in case of nominations

  • If a nominee is a minor, you need to assign a suitable guardian.
  • Any change in nomination necessities a witness
  • A nomination is held good only in the absence of a valid contrary claim by another person.
  • If the nomination is challenged by will that disposes of assets in a contrary manner, the nomination will be rendered ineffective.
  • Also, if the person dies intestate (without a will), the laws of succession will override the nomination.

Start working on your will

Limitations of the nomination process increase the need for a will. If you want a conflict-free distribution of assets amongst your dependents than you must write a will.

People still believe that will is for the affluent. A will should be written by all those who have certain moveable and immoveable assets and also, want a peaceful distribution of the same among their children and dependents.

Estate Planning

Another method of distributing your property amongst the heir could be estate planning. Financial planners and wealth managers help you in valuing your estate and completing other formalities. It involves amassing and disposing of the assets to ensure that the end goals of the owner are met after his/her death.

Advice is given on the basis of valuation of the assets for the purpose of the division amongst multiple heirs. The applicable laws of the land (and religion of the individual) with respect to succession are also taken into account.

It also includes tax planning to ensure minimum outgo of tax at the time of transfer to the beneficiary.

Writing a will is also a part of the estate planning process. You may also choose to form a trust in case the beneficiaries are minor children or charitable organizations.

The difference between a will and a trust is that while a will can be implemented only after following the requisite legal procedures whereas the trust can transfer the property to the beneficiary immediately after the testator’s death.

 

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Nomination process in case of life insurance

You are buying life insurance to secure the financial life of your dependents. To avoid your financial dependents of any troubles you must ensure that you have bought a cover of the adequate amount, disclosed all the correct details and informed your dependents about you having a term Insurance. Have you nominated your dependents in your life insurance or you thought that you shall do the same eventually? What is Nomination? Nomination is a right given to the life insurance policyholder to appoint a person or persons to receive the benefit under the policy in case it becomes a death claim. Assume if a person who is insured dies, the nominee is entitled to receive the policy proceeds subject to certain conditions. Meaning of a nominee as per the earlier laws Earlier, the nominee in your insurance policy would not in actual receive and benefit from the insurance money but was to act as a trustee of the claim amount he or she would receive from the death claim. Acting as a trustee means that the nominee had to distribute the claim amount as per the legal heir rules or the WILL of the deceased person. Hence, earlier nomination meant not an ownership of claim amount. This lead to many legal battles between nominees and legal heirs to claim the death claim amount of the insured person. What is the meaning of Beneficial Nominee in your Life Insurance? IRDA introduced the concept of Beneficial Nominee. Now as per the new rules, suppose you nominate your parents (sibling is not included), spouse or children, then they will be considered as the beneficial nominee and the death claim amount will be payable to ONLY them. Other legal heirs as per the will or otherwise cannot claim the death claim amount. Accordingly, Life Insurance Company will pay the death claim benefit ONLY to the nominees. Hence, while buying a life insurance, you must have a clarity of mind as to whom do you want the death claim amount to be payable in your absence. The nominee also has the right on the claim money if the policyholder dies after the policy period is over but before receiving the maturity benefited. Things to keep in mind while assigning your nominee
  • You as the policyholder can declare the nominee at the time of policy application, or at any time later during the term of the policy.
  • You can nominate anyone as a nominee – your spouse, your children, relatives, your friends, unrelated people, anyone. You need to provide details such as full name (as per the nominee’s documents), gender, address, age and the relationship between the nominee and you (if there is one).
  • Suppose you nominated your friend or someone who has no insurable interest in your life, then such non-relative will not be treated as the beneficial nominee. In such a situation, your actual beneficial nominees or legal heirs can prove that he or she is not a beneficial nominee and can get the claim amount from the nominated person.
  • A valid WILL still can negate the rights of beneficial owner and money can be disbursed according to the WILL of the insured.
  • The nominees’ details are generally printed or endorsed on the policy certificate. If such information is not available on policy document, then the nomination is not valid.
  • Change or cancel nomination for INR 100 for each change.
Types of nomination permitted or advised
  • You can also nominate multiple people in a particular ratio, e.g. 40% to person A and 60% to person B.
  • Even successive/alternate nomination in life insurance is possible. This is nothing but the nomination order. e.g. nominate the money to person A. If he is not alive at the time of claim, it can go to person B. If B is not alive as well, it can go to person C. All the names of A, B and C need to be declared upfront at the time of successive nomination in life insurance. This is the best way to nominate and it is highly recommended.
What if One Makes No Nominations in the Policy
  • In case your policy fails to have a nominee, you need not worry, as the sum assured will be discharged according to the following rules –
  • The insurance company might dispatch the claim amount to Class I legal heir which includes- insured’s spouse, son, daughter, and mother.
  • In case of a Will, the process is followed according to the Indian Succession Act, 1925 where the claim amount is distributed according to what has been stated in the Will. A succession certificate from the court will be required, to have a clarification on whom to handover the claim amount.
  • Whenever there is more than one legal heir, insurer intents are to safeguard their interest in scenarios of dispute on settlement of the claim. For this, the insurer shall ask for an indemnity bond, joint discharge statement, and waiver of legal evidence.

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