The importance of succession planning

Your money matters

Not so long ago it was widely reported that over Rs. 82,000 crores is lying dormant and unclaimed with banks, life insurance firms, and mutual fund houses. - A rather surprising revelation, given the efforts people put in to save and grow their wealth to secure their future and ensure a comfortable lifestyle, both for themselves and their loved ones. So where was it lost in translation, leaving so much money unclaimed?

Fact is, a  good investor is one who not only makes the best investment decisions but also educates the beneficiaries on how to access these funds when they need it the most.

Planning for the rainy day works smoothly if the investor is around to attend to it himself/herself. However, in his/her absence, there has to be a Plan B to help the near and dear ones negotiate the crisis. For this, it becomes critical for a succession plan, wherein someone else in the family or outside, is able to step in and take charge of the family finances when the incumbent is unable to do so.  

Here are some actions you should take to secure the future of your loved ones: 

Update your nominees 

Either your wife or children (above 21 years) can manage money matters after you, depending on the level of their financial literacy. Accordingly, you should update the nomination details for all your investments. Without a nominee, claiming the money invested would become a lengthy, time-consuming procedure. 

These days, all financial companies encourage their customers to complete the nomination process if not done so far. Typical feedback from the customer indicates a propensity to put off doing this work until a convenient time. However, you must set aside some time to complete this process immediately. Proactive steps taken today can avoid lengthy and complex actions in the future.

List out your assets and
investments

We leave no stone unturned to make ourselves financially sound. But we get so engrossed in daily schedules that we forget to file and maintain a list of our assets and investments. It is crucial to prepare a checklist of all your investments in writing and share the details with your partner. Ideally, the list should include all bank account details with user IDs and passwords, credit card information, loan (if applicable), fixed deposit certificates, mutual fund schemes, life, and general insurance policies with agent details, and disclosure on any loans repaid in full. 

Discuss financial matters

We invest our hard-earned money into different investment instruments like fixed deposits, equities, mutual funds, etc. Commonly, we neither discuss these investments nor fully disclose them to anyone to maintain confidentiality. However, when the primary decision maker is not around, the unaware family members never approach the concerned institutions to claim the funds saved for them.

Discuss your day-to-day financial moves and the reasons behind them with those who will take care of your finances after you. Involve your successors in your finances to make them aware of where money is parked or invested.  

Financial literacy of successors

We come across many instances where a spouse is unaware of the process to claim insurance policies, and if they are aware of the process, they do not know what to do with the claims. Educate your successors about the necessary steps to take in such situations. This awareness can prevent them from undergoing another trauma while dealing with emotional and mental stress. Try to equip your successor with the crux of your financial knowledge, empowering them to make the right financial choices in your absence. 

In short, involve your family members in your investment decision. Regularly discuss your investments with them so they know the steps you are taking for their financial well-being. Additionally, update the nominee details while making any investments. With a few simple steps, you save your family members from procedural delays in claiming their rightful succession.  

(The writer is Head - Online Business, Axis Securities)