This article gives an introduction to succession planning – it talks about the importance of nomination, and describes the process of making a Will.
You are a savvy investor, and have made good long term investments in stocks. You have also made investments in debt instruments, gold, real estate, etc. You are alert, and keep an eye on the latest developments. Through your sincerity, you have built a decent corpus.
But what happens if you are not around? Who would your assets go to in case of your death? Shouldn’t you plan for that too, just like you plan all your investments?
Yes, you should. And you can do it through a Will, and through Nominations.
What is a Will?
Will, like the name suggests, is a document that describes how you want your assets to be distributed after you. In a will, you describe whom your assets would go to.
A Will is the single biggest tool for succession planning, because this is the document that makes it clear how your belongings would be distributed. Having a Will reduces a lot of trouble for your successors after you are gone.
How to make a Will
There is a misconception that a Will has to be on a Stamp Paper, and that it has to be made by a lawyer.
This is not true. A Will can be written, typed or printed by you, and it can be on a plain paper. A Will can be registered, but again, it is not a legal necessity. The only requirement for a Will is that it has to be signed by two witnesses.
Thus, if you want to make a Will, just write it out on a plain paper, and get it signed by two witnesses. That’s it – it is as simple as that!
Points to consider while making a Will
Since a Will is all about distributing your assets, the first step is to find your Net Worth. (To know more about Net Worth and to learn how to calculate it, please read “Your Personal Net Worth – Importance and Calculation“) Net Worth tells you what exactly you own, after considering all your liabilities. Thus, it would be a good starting point for making a Will.
Then, you need to decide the entities to which you want to give your assets. They can be people, like your spouse, your kids, or other relatives and friends. Or they can be other entities, like religious and charitable trusts or educational institutions.
Then, you need to decide how much you want to give to each person or entity, and list that in the Will. As far as possible, be precise – list (and describe, in case of things like jewellery) the asset, and the name of the beneficiary against it. Proper listing would avoid a lot of trouble (and litigation!) later on, and would make the process smoother for your beneficiaries.
And after you make the Will, remember to keep it at a safe place – This is very important, so that it is not manipulated or altered in any way. Most people keep the Will either in a locker, or with their lawyer.
Who should make a Will?
Many people believe that only old people should prepare a Will. I disagree – I believe that anyone who owns some asset should prepare a Will.
It is like insurance – although young people are less likely to die, they still buy life insurance because death is always uncertain. The same way, a person of any age should prepare a Will.
What is Nomination?
Nomination is another way of passing your assets to someone. If you have provided the name of a nominee for an asset, the asset would be passed on to that person after your death without any trouble.
But remember – nomination does not provide ownership of the asset to the nominee. It provides only trusteeship – the nominee would not become the owner of the asset, but would become the trustee of the asset till it is given to its beneficial owner as defined in the Will.
Where Nomination can be done?
The facility of nomination is available for most financial assets. It can be done for mutual funds (MFs), demat accounts, bank accounts, Exchange Traded Funds (ETFs), etc.
So, go ahead and prepare a Will. Also, give the name of a nominee at all the places where nomination facility is available. It would mean that your hard earned money goes only to the people you want it to go to, and would also make the life of your successors a lot easier!
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I have read the above article it is very informative.
Please cl;arify on the following:
1. Mr X had made a will on plain paper, typewritten
and signed by two witness before his death.Mr.X
is survived only by wife and one son.And in the
will he had distributed his assets. And shares was
given to his son.But unfortunately Mr.X had not
assigned any nominee while purchasing shares nor
had send a nomination form at a later date. So the
Shares are still in his name. When the son
approached the companies for transmission. The Son
was asked by the companies in which Mr.X had
shares to get the will probated or obtain a sucession
certeficate or letter of administration for court.
And the Mr X’s will was not considered So will on on
PLAIN PAPER with 2 witness has no value without
registering has not helped in transmission of
shares.kindly comment.
Hi Mehul,
To be frank, this seems to be a legal issue – and I do not have much knowledge there.
Having said that, let me clarify a few things.
nominee and legal heir are different. A nominee is just a trustee of assets, and is responsible for handing them over to the legal heir.
Thus, not defining a nominee should not have any impact in this case. (Of course, the process would have been smoother if a nominee had been defined)
When you approach a company or financial institution to inherit something, they would not accept a will. They would need to ascertain that you are the legal heir.
Legal heir for a person is defined through the will, and that’s where the will comes into the picture. So, the succession certificate (which says that you are the legal heir) would be issued based on the will.
I have a demat account for which I want to make nomination of my daughter.however the bank where my demat a/c is opened tells me that the nominee MUST have a PAN.MY daughter is studying in US and had left for US immediately after her M.Sc.hence does not have a PAN card.
Please advice
Years ago, when travelling by train an elderly man asked me this qustion which I could not answer. can u help? It is hypothetical but very intersting.
A man wrote his will some weeks before his death as he knew that his death was very near. His wife was pregnant for two months.
(i) In case the child is male (son), the amount should be divided in 2:1 (son should get twice of the mother )
(ii) In case the child is female (daughter) the amount should be divided in 1:2 (mother should get twice of the daughter)
The man died. But his wife gave birth to twins- one male and one female.
Now how should the asset be divided?