This happened several years ago. It must have been the monsoon season and I was on this flight from Delhi to Mumbai. It was one of the most turbulent trips. At one point, I had shut my eyes and had started praying. At that instance, this thought came to me. What if the plane were to …..? How will my wife, my parents even know where all I have invested in? And then that large investment which is still held individually – how will it move to my wife? More than the fear of the inevitable, the fear of my family being clueless about my investments was shaking me up.
The turbulence was short-lived, and the plane landed at its destination.
That night, the first thing I did after I got home was the following:
1. Updated the excel where I would maintain my investment records
2. Added important columns, like
- which demat account, folio, each investment is tagged to, and which bank
account is linked to the investment - whether every investment has a joint holder and / or a nominee
- who to contact
- instructions (username / password) on how to access each investment
3. Updated my insurance register, as I had recently purchased a policy
4. Wrote e-mails to the concerned for adding a holder (takes time as the holder assumes ownership of the investment) / nominee (easier as the nominee is merely a custodian)
5. Sent the file to my wife’s email ID – after adding a strong password to it.
6. And finally, thanked my stars and heaved a sigh of huge relief! The turbulence inside me finally settled down.
This brings me to a very fundamental point. Why do we spend so much time away from loved ones, make compromises on our health, take all the work-related stress. So that we can earn a living, save some money & invest it for a better tomorrow. Why not close the loop by ensuring that just in case, we are not there tomorrow, the fruits of our labour do not go waste and our loved one’s can continue to lead a comfortable life.
However, that is only possible, if after us,
- they know where the investments are
- the investments can move in their name without much ado
The solution to the first point is to what I did that night – which is to have a register of all investments and letting someone know about its existence. We can call this as the wealth register.
The simpler solution** to the second point is to ensure that every investment is done with a joint holder and / or nominee. To understand this better, let us consider the process required for moving investments held in single name where there is no nominee and where there is a nominee. Let us assume the investment is in a mutual fund. On death of the main holder, the mutual fund will transmit the units in the name of the nominee basis death certificate and basic KYC of the nominee. However, in the absence of a
nominee, the mutual fund would insist on either a Court order or a probated copy of the will.
The mutual fund would not know who the rightful heir of the investment is. However, getting a Court order is a time-consuming process and can take several months. Now, the regulator has also instructed all mutual funds to ensure that all folios have nominees – so that is a welcome safety net being carved out in case of an eventuality. But we all have investments outside mutual funds as well and then there are our bank accounts, demat accounts.
I recently came across an ultra-rich person whose single largest investment is a particular stock held in a demat account which was in his single name. Interestingly, his account is with one of the very large & renowned wealth firms for a very long time. However, they had blissfully ignored this glaring gap. This is indeed unfortunate as wealth managers are expected to be diligent on something as critical as this.
This is also a point for employers to ponder over. What-if they were to do regular coaching sessions around this for their employees?
* ps – a nominee does not become the owner of the investment. They are only the custodians and need to settle the investment as per the last wish of the deceased or as per succession acts. However, it is still a far better situation to be in.
** there are other solutions as well – like writing of a will, a trust etc.
