I was having a long chat with a good friend of mine which, as normally happens, were discussions ranging from office, health, online classes for kids, Covid 19, and happenings about the whole world in general. In between, she briefly talked about a recent incident that happened to one of her colleagues.
Recently, this colleague of hers had lost his mother. However, after the funeral, both he and his sister had a tough time handling their mother’s financials. The only thing they received was a bank locker key and some passbooks of different Banks. Some deposits had nominations in their name and could be easily settled as the formalities were simple and easy to comply with. However, she had to face an ordeal for the accounts where there were no nominations. She had to go through a lengthy process as laid down by the banks to get the settlement of her mother’s accounts. Exasperated, she asked me “why was the process so difficult?” After all, it is their money and they are legally entitled to get it.
This also reminded me of a news clipping of a wife forced to approach a Court of Law to get access to her husband’s bank account. She needed access to pay towards her husband’s treatment whilst he was lying incapacitated in a hospital.
The above incident prompted me to write about a few simple ways of how to give a hassle-free charge of the accounts to one’s family members.
1. Setting up a Joint account
A Joint Bank Account is an account in the name of two or more people. The most notable convenience of having a joint account is that all the account holders have the right to operate the account i.e. deposit and withdraw. Thus, any of the account holders can operate the account even if the other one is away at the moment.
However, depending upon banks, there may be restrictions on mandating operating conditions such as former or survivor, jointly, either or survivor, etc. If an account holder of the joint account is deceased, then the survivor/s has the right to access the account. The survivorship clause will entitle the surviving account holders to operate it even if there is a beneficiary/ nominee named in the account.
However, there might be some disadvantages too with a joint account such as lack of privacy. Each account holder can keep track of the other’s spendings and earnings, giving a sense of losing control of one’s finances. Further, a person’s financial problem can become a financial concern for the other account holders too. As it may result in lowering their credit score. Also, any statutory order of attachment against one account holder may result in making the account non-operational for all the depositors.
2. Appointing an agent through Power of Attorney:
What is a Power of Attorney?
A Power of Attorney is a legal tool through which an account holder (the principal) can appoint a person, called an agent, empowering him to operate the account.
In case one is incapacitated, one may want a Power of Attorney Holder to handle all the finances including paying bills, accessing the bank accounts, and making other financial decisions.
The Power of Attorney can be revoked at any point in time, however, remember to notify the bank when the Power of Attorney is revoked to prevent any probable abuse of the same. Also, once the depositor (principal) dies the Power of Attorney is no longer valid.
3. Making a Will or Testament
What is a Will?
A Will or Testament is a legal document containing a voluntary declaration in which a person called the Testator may name one or more personal or professional like a Solicitor to manage his estate and distribute the estate to named beneficiaries after their death.
Depending upon the territorial jurisdiction of the Testator, Law relating to wills may vary regarding the presence of a witness (like some states may require the presence of witnesses while some may dispense with), notarising (some States may emphasise for public notary), stamping(In India, a will neither needs to be stamped nor notarized), etc.
However, the basic features of laying down a Will are very simple and easy, not even requiring the presence of a Lawyer/ Solicitor, except for drafting a will, which also may not be necessary these days due to the availability of a large number of forms and draft applications.
A will may be typed or handwritten (Holographic) Will. The basic requirement of a Will is that the Testator should be major and of sound mind. Although there are no basic formats of drafting a will, there are some basic thumb rules which are
1. Declaration stating the age and soundness of the Testator. Revoking all previous will codicils (additions or part of a will), if any, and naming executor/s, and declaring that the present Will is the last and the only will of the Testator.
2. Listing out all the Assets,
3. Manner of distribution/ bequeathing of these assets,
4. Signing and dating the will and ascertaining presence of non-interested adult witnesses i.e. person not a beneficiary of the Will,
5. Storing the Will in a safe place. To inform the presence of a Will to anyone including the executor is completely a personal choice.
After the testator has died, an application has to be made in a court with probate jurisdiction to determine the validity of the Will called Probate. Probate will satisfy the legal requirements and appoint the executor of the will who will be responsible for administering the estate of the deceased testator.
4. Providing Nomination in the accounts.
A nomination is a facility that enables an account holder to appoint an individual as a nominee who has the right to claim the money lying in the account of the deceased depositor. The easiest way to make a nomination is to name the nominee at the time of opening of Bank account. Although appointing a nominee is optional it is always advisable to nominate a person as it will minimize the hardships of the legal heirs in the event of the death of the account holder.
A nominee may not necessarily be the legal heirs of the depositor. He /She may be a legal heir, friend, relative or acquaintance. A nominee may be a major or minor, although in case a nominee is a minor, the name of the guardian of the minor too should be mentioned. Nomination by itself will not make the nominee the owner of the account. The nomination will make the nominee a trustee of an account. A nomination may be changed or cancelled at any point of time when the account is operational.
The greatest benefit of appointing a nominee in an account is that Banks can settle the account in favour of the nominee without emphasizing a succession certificate, Letter of administration, or a Court order and the same can be done expeditiously without any hassle. The same goes for handing over the contents of the locker too. So, nomination simplifies the process of settling the claims pertaining to the deceased account holder in favour of the nominee.
A crisis is unforeseeable. But a small and timely conscious act of ours will go a long way in making the financials hassle-free and easily accessible to our loved ones.
Disclaimer: The suggestions and materials presented here should not be regarded as financial or investment advice and are only for general information. The author and the publisher is not a registered financial advisor. The information/advice rendered herein should never be used without consulting financial professionals. By reading and using our content available herein, you are demonstrating your consent and agreement to our disclaimer.