Personal finance

Personal Finance: Writing a will is essential to financial planning

We are often so engrossed in providing for our loved ones and choosing the right investments to secure their future that we forget to write a will that would detail how we intend to allocate our various investments. Many people interpret a will as merely a legal document to distribute properties and take care of minor dependents, but the document, at its core, offers clarity of succession.

“A will can contain details stating apportioning of personal financial investments. An estate of the testator is all the property a person owns or controls. The property in one’s estate may consist of financial assets (e.g., bank accounts, stocks, bonds, or business interests), tangible personal assets (e.g., artwork, collectables, or vehicles), immovable property (e.g., residential real estate, tea/timber rights), and intellectual property (e.g., royalties). Accordingly, it is always beneficial that the testator should apportion all his or her movable and immovable assets at the time of preparation of the will so that shares/assets allotted to beneficiaries or legal heirs can be retained by them,” Neha Gupta, Principal Associate, Athena Legal said.

Nominee vs beneficiary vs legal heir

Ever tried filling a bank application form or a consent form before making your investments? Apart from your details, you are required to choose a nominee for your deposits and investments that may include your parents, spouse, siblings, and children. While opening bank accounts or investing money in bank deposits, you can either choose one nominee or multiple nominees for your various investments from members within your family and not outside your family.

As opposed to the widely held belief that the nominees are people who get the money and keep it with themselves, a nominee is a person who has a right to hold the assets/property on behalf of the deceased in trust, to be distributed to the actual persons having beneficial ownership under the succession laws.

“A beneficiary is a person having actual beneficial interest in the asset/property as per the succession laws, whether under a will or otherwise. In certain cases, such as transmission of shares, ‘nominee’ also indicates beneficial ownership of the shares, as specifically provided in the Companies Act,” Amit Jajoo, partner, IndusLaw explained.

A nominee may or may not be the legal heir to the will. If the nominee is from someone outside the family, he or she is responsible for the disbursement of the proceeds among beneficiaries mentioned in the will. The beneficiary (one or more) has a financial interest and can either be from the family or outside. Beneficiaries can also include financial institutions that may have provided loan(s) to the person writing the will. In most cases, legal heirs are the beneficiaries mentioned in the will.

However, the beneficiaries may be different from legal heir(s), which is why you must name designated beneficiaries in your will. “According to the provisions of the Indian Succession Act, 1925, any person capable of holding property (including an outsider) can be nominated as a beneficiary under a will. If a minor has been named as a beneficiary, then a guardian should be appointed by the testator to manage the bequeathed property,” Petrudhka Dasgupta, Partner, Induslaw said.

Passing away without naming beneficiaries irrespective of whether they are the same or different from the nominee(s) may result in unnecessary legal hassles between the designated beneficiaries and legal heirs of the assets getting divided.

We all may not have the benefit of having a family or being in the company of immediate family members. This has forced many people to rely on relatives, extended family members or chosen family to take care of their money. However, a nominee must be reliable and worthy enough to carry out the dictates of the will. A friend or live-in partner can be a nominee, and it must be explicitly mentioned in the will for the assets to be handed over to him or her for proper distribution and allocation as mentioned in the will.

Why must you write a will?

Many people do not understand why a will must be made, especially, with the nominee(s) being mentioned for all investments. As Gupta explained, a will supersedes the nomination for most assets. “A will is the supreme document that specifies the exact intentions of the testator to the succession of properties.” So, for example, if a bank account has a nominee, and the will has the name of another beneficiary, it is the latter that will receive the money in the account. “It is important to note that a will that has been proven valid wields the power to override any arrangements or nominations made during an individual’s lifetime.”

(Personal Finance is a weekly feature that aims to provide our readers pertinent and helpful financial information)


Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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