Pass on your assets to your kith & kin without hassles

As the saying goes,“in this world, nothing can be said to be certain except death and taxes”. So let us prepare ourselves and make life easier for our children when we leave this world for good

1st October every year is observed as “World Elders Day” and this year too a number of elders’ organizations celebrated the day in their own way in India as well.  All the elders of today have worked hard during their working years and would have invested their savings in various assets, which would help them to live a life of dignity during the second innings of their life. During our working life, it is possible that many of us have had no time to look in to our personal matters, as we were engrossed with the day-to-day humdrum of busy life and the rate race of reaching deadlines everyday. But when we reach the stage of being considered as a senior citizen, it is desirable that we ensure that those assets that are left over after meeting our needs during our life-time, are passed on to our kith and kin or to anyone whom we desire to give away, smoothly without causing too much hassles to them.  

Why plan for a smooth pass over of our assets?

As is well known, the quality of service that we receive whether in public or private sector leaves much to be desired. There is no consciousness to put customers’ interest first and there is no sensitivity to the problems encountered by customers, so much so, even when we are alive we find it difficult to get back our own money, whether it is from banks or insurance companies, resulting in our having to fight for our own rights all through our life.  So what better service can we expect to get when we are not around to fight for our rights? As the saying goes, “in this world, nothing can be said to be certain except death and taxes”. So let us prepare ourselves for the inevitable and make life easier for our children when we leave this world for good. Proper planning allows disbursement of our estate to the right beneficiaries.

Where to start?

The first thing to do is to prepare a list of all your assets and liabilities, if any, including bank accounts, deposit accounts, insurance policies, mutual funds, stocks and shares, bonds and debentures, post office deposits, PF accounts, and any other deposits like security deposit for telephones, electricity, water, gas etc. Once this list is prepared, if you find that any of these accounts are no longer used, it is time to consolidate all these accounts into to one or two accounts, by closing those accounts which are not being actively used. While closing the accounts, ensure that there are no standing instructions given for any payment from those accounts, like payment of telephone, water, electricity bills, etc through the electronic clearing system (ECS).  

Once consolidation of all your accounts is done, there are three methods by which you can smoothly pass on your assets to whom you desire to give by complying with the following. Though making a will is the best option to pass on your assets according to your wishes, if you do not wish to make a will, you can at least follow the first two options which will reduce the hassles considerably to your heirs.

 1. By making all your bank accounts, deposits accounts, etc as joint accounts.

2. By making nominations to all your accounts, policies, etc if not done already.

3. By making a will to bequeath your assets to anybody as per your wishes.  

Conversion of all your bank accounts into joint accounts is the easiest thing to do, if they are not already held in joint names. If your accounts are presently in a single name, it is possible to add up to three more names into your existing accounts without closing the accounts. Normally spouse’s name is added to the account, if one wishes to leave every thing to the spouse. But it is not necessary to add names of only relations to your account. After adding a name, the deposits and balances in your account continue to be your property. Even for tax purposes, the first account holder is considered as the owner of all the assets, and s/he has to offer for tax income received on a joint account.  

While adding the names, it is possible to ensure that only the first depositor operates the account by stipulating the operating instructions as “No.1 or survivor” with the consent of all the depositors, though where the joint depositor is the spouse, you can stipulate the operation of the account as “either or survivor”. In the case of retired public servants, earlier it was mandatory to open a single account in the name of pensioner only but recently this condition has been relaxed and you can now get your pension to the joint account with your spouse, whose name can be added if you have a single account even now.

Read Planning your legacy can be a complex affair

Making a nomination is the next best thing to do, as this will facilitate expeditious settlement of claims and minimize hardship caused to the family members in case of death of the depositors. It is therefore advisable to make a nomination in all your bank accounts. Only one person can be appointed as a nominee for each deposit and or each account and the nominee need not be a relation of the depositor. The nomination once made can be cancelled and you can nominate another person whenever you wish to change the nomination. Another advantage of nomination is that it does not require the consent or the signature of nominee, and all nominations can be kept confidential if you so desire.  

The following rules may, however, be borne in mind while making the nomination:                                                                                                                    

a) Any variation or cancellation of a subsisting nomination can be made either for a single account or a joint account, but in the case of joint accounts only with the consent of all the surviving depositor(s) acting together. This is also applicable to deposits having operating instructions “either or survivor”    

b) In the case of a joint deposit account, the nominee’s right arises only after the death of all the depositors.

c) Nomination is the process of appointing a person to take care of your assets in case of eventualities. According to law, a nominee is a custodian of the assets and not the owner of the asset. A nominee will hold the amount as a trustee and will be legally bound to transfer it to the legal heirs whose names are mentioned in the will.                                                

If you have insurance policies in your life which are yet to mature, it is advisable to take care of the following:

a) Ensure that proper nomination has been recorded in the policy. If you wish to change the existing nomination, it is possible to do so by filing a request with the insurance company. 

b) The age of the assured has been admitted in the policy as this is crucial for settlement of claims on the policy.

c) Ensure that all the premiums have been paid up-to-date and the policy is in force.

If your assets include stocks and shares, bonds and debentures, etc it is desirable to convert all these assets in dematerialized (demat) form by opening a demat account with a depository, if not already done. The advantage of having all these investment in demat form is that transfer of the entire portfolio of these assets to your nominee or the legal heirs can be very easily done by complying with the requirements of the single depository, instead of submitting multiple claims to different companies where you have your investments.

If you decide to open a new demat account now, it is better to open the account in joint names with your spouse, as unlike bank account, there is no provision to add any name later in a demat account. Besides, please ensure that you make a nomination for such demat account also for smooth change over to the beneficiary.

Making a Will:

All said and done, it is still advisable to make a will as it will help you to dispose of your assets according to your wishes.  By means of a will, you can apportion your property among your children according to their needs, like making greater provision for a handicapped child, or give a part of your property to charity, etc. In the absence of a will, the property of the deceased will pass on to the legal heirs in accordance with the laws of inheritance applicable to him.

Moneylife Foundation holds seminar on personal finance, wills, nominations and transmission in Pune

(The author is a banking analyst, and he writes for Moneylife under a pen-name ‘Gurpur’)



Vaidya Dattatraya Vasudeo

4 years ago

Can some one give me some web-link where I can get the draft to start with. Thanks.

Covered bonds with NHB Intermediation coming?

The NBH group report has suggested a unique structure for introduction of covered bonds in India and these may be a reality very soon

A Group appointed by the National Housing Bank (NHB) to suggest capital market measures for residential mortgage lending submitted its report recently. The report was released by Securities and Exchange Board of India (SEBI) chairman UK Sinha in Mumbai on 17 October 2012.
The group has suggested a unique, NHB-intermediated structured for introduction of covered bonds in India. NHB will act in the role of a special purpose vehicle (special purpose vehicle) to hold the collateral pool, and to assure repayments to bond investors from out of the proceeds of the collateral pool. 
Covered bonds are an instrument for funding residential mortgages that have been gaining increasing popularity of late, particularly after the sub-prime crisis. Covered bonds were the mainstay of continental Europe—its usage outside of Europe has been a recent phenomenon. Covered bonds are bonds issued by a mortgage originator that are full recourse obligations of the issuer, but provide investors with a bankruptcy-protected claim on a pool of residential mortgages. The pool, called “cover pool” is a dynamic pool that also carries the credit enhancement necessary to provide strength to the bonds. 
The bankruptcy-protected right over the cover pool comes mainly in two ways—either by way of a special legislation—as in case of several European countries, or by way of a special structure. The former structure is called legislative structure, and the latter is called structured covered bond structure. The principal followers of the structured covered bond structures include UK, USA, Canada, New Zealand, Australia, etc. 
The NHB Group considered the legislation option for introduction of covered bonds in India, but favored the structured covered bond option, for the flexibility it offers. Even in case of structured covered bonds, the Group has discussed two options—NHB-intermediated structures, and self-intermediated structures. In the self-intermediated structure, the issuer will transfer the legal title in a dynamic collateral pool to an SPV which acts a guarantor for the repayment of the bonds. In case the issuer defaults, the SPV uses the legal title over the pool to repay bonds it has guaranteed.
The NHB-intermediated structure, strongly recommended by the Group, will be a unique blend of the flexibility of a structured covered issuance, as also the backing of an apex regulatory body. Here, the transfer of legal title over the collateral pool happens by virtue of operation of the law—the Group has suggested a minor amendment to Section 16B of the NHB Act to allow for a statutory vesting of title in the NHB. With title over the pool, the housing regulator assures that NHB will use the proceeds from the collateral pool to repay investors in case of a default by the bond issuer. NHB has several statutory powers under the NHB Act, including power to take over management of the issuer, etc. The Group felt that the presence of NHB in the structure will go a great way in ensuring investor comfort. NHB’s position may also help in notching up the rating of the bonds over the above the rating of the collateral pool and the attendant credit enhancement.
Covered bonds do not imply a recourse against NHB—hence, they are not a guarantee by NHB. As is the globally understood feature of covered bonds, they imply dual recourse—primary recourse against the issuer, and secondary recourse against the collateral pool. It is the secondary recourse that is bankruptcy-protected.
The Group, led by Ananta Barua, executive director of SEBI, had this writer also as a member. The Group included representatives from ministry of finance, Reserve Bank of India (RBI), leading mortgage originators, rating agencies, banks, etc.
NHB is reportedly interested in fast-tracking the issuance of covered bonds in India. The Group has given a draft of Covered Bond Regulations that NHB may promulgate. If the needed amendment of law can be passed without any delay, covered bonds in India may be a reality very soon.
In addition to covered bonds, the Group has made recommendations about residential mortgage backed securities too. The Group feels that there will be intensive demand among Indian banks for residential mortgage backed securities, as the priority-sector treatment has been denied in case of loans to housing finance companies (except in case of loans of small sizes). 


Property seller can forfeit entire earnest money paid by buyer: Supreme Court

Setting aside a Delhi High Court order, the apex court ruled that earnest money is paid or given at the time when the contract is entered into and as a pledge for its due performance by the depositor and it is to be forfeited in case of non-performance by the depositor

New Delhi: Earnest money paid by a purchaser of an immovable property can be forfeited by the seller if the former fails to pay the remaining sum, the Supreme Court has held, reports PTI.
A bench of justices KS Radhakrishnan and Dipak Misra said the earnest money is given to bind the contract and the seller is entitled to forfeit it if the sale of an immovable property falls through, due to the fault of the purchaser.
"Earnest money is paid or given at the time when the contract is entered into and as a pledge for its due performance by the depositor and it is to be forfeited in case of non-performance by the depositor," the bench said.
The bench gave the ruling setting aside a Delhi High Court order which had held that the seller is entitled to forfeit only a nominal amount and not the entire sum.
The bench said irrespective of the amount, the purchaser is entitled to forfeit the entire money.
"There can be converse situation also that if the seller fails to perform the contract, the purchaser can also get the double the amount, if it is so stipulated.
"It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money, then the forfeiture clause will not apply," the bench said. 
The court passed the order on a man's plea against the High Court's order directing him to forfeit only a nominal amount of Rs50,000 out of Rs7 lakh earnest money paid by a purchaser after he failed to pay the rest of Rs63 lakh to get the property.
"We are of the view that the High Court has completely misunderstood the dictum laid down in earlier apex court judgements and came to a wrong conclusion of law for more than one reason, which will be more evident when we scan through the subsequent judgements of this court," the bench said.
"We are, therefore, of the view that the seller was justified in forfeiting the amount of Rs7 lakh as per the relevant clause, since the earnest money was primarily a security for due performance of the agreement and, consequently, the seller is entitled to forfeit the entire deposit," the bench said.


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