The loss of a loved one in the family is sure to be very stressful, but lack of knowledge of the things to do with the deceased’s finances can be equally stressful. More often than not, individuals undergo a lot of pain in complying with the paper work to get back what is legally theirs.
However, this task should not be that daunting if the whole exercise is organised and prioritised to speed up the process of realisation. What follows in the foregoing paragraphs is information that will be helpful for individuals in such situations to save their precious time, money and efforts.
Organise relevant documents
The first step should be to draw out a complete statement indicating all the financial records of the deceased. This is most crucial because of haphazard record-keeping and lack of financial information passed to the near and dear ones in the family. This step also has the potential to consume the most amount of time, unless the deceased had followed a centralised record-keeping.
The list should include bank accounts, fixed deposits, shares in demat accounts, physical shares, mutual funds, bonds, debentures, properties, insurance policies, other beneficial interests, if any. Equally important is to gather information about payables like credit card statements, outstanding loans, outstanding medical bills, etc. Last, but not the least, the Will of the deceased, if available, should be obtained.
Organising the total financials in this manner, will help the individual prioritise and lay down a complete procedure to distribute the wealth of the deceased. In addition, it will help in finding out the accounts, assets, liabilities as well submit claims under the relevant insurance covers.
Individuals should note that the process of claiming these assets will require copies of the death certificates, in most chances attested copies. So, it is better to have three master copies of the death certificate and obtain multiple copies attested by the appropriate authority.
Appointing a professional
In the last few days, I was amazed when I had an elderly client, who had recently lost his spouse, come up to me and request to assist him in distributing his wife’s estate. For the fear of high costs, many people prefer to adopt the ‘do-it-yourself’ way for estate distribution too, but that may not always be sensible. Particularly, if there are beneficiaries beyond the immediate family in the deceased’s estate, liability of the individual executing the estate distribution is quite high.
Also due to an aversion to personal finance, many people may not want to take up this job all by themselves. Appointing a qualified professional will help in distributing the estate much easier without much liabilities.
Handling demat accounts
It is very important that every demat account holder appoints a nominee for his demat account, as it enables a smooth transmission of the shares in the demat account to the nominee. In cases, where a proper nomination has been made, the relevant paper work at the depository level will help in transferring the shares to the nominee. Therefore, at the time of nomination, account holders have to ensure that the nominee has a demat account.
If the deceased’s demat account is held jointly with a family member, then on death, the demat account gets freezed, not allowing any operations in the account. In such cases, the joint holder has to open another account in his/ her single name and transmit the shares from the joint-holding account to the new single account.
Handling transmission of mutual fund units
Most mutual fund houses allow transfer of units to the second holder or nominee where there are no joint holders in case of death of the first holder. This process is referred to as transmission of mutual fund units.
For transmission, the joint-holder or the nominee has to submit a letter to the fund house along with copy of the death certificate of the deceased unit holder, their own KYC and bank account mandate for registering their own bank account. Depending on the value of the units, nominee may be required to submit an indemnity bond too. The process of transmission of units can take anywhere between 10 days to a month.
Filing of tax returns
If the death of the individual happens at any time during the year, the assessment of his income is to be done up to the time of his death. Accordingly, the income tax return for that relevant year up to the date of the death will required to be filed by the legal heir. The return also needs to be signed by the legal heir in the same capacity.
If the estate settlement process takes longer, due to any court intervention or any other reason, separate return will need to be filed from the date of death till the end of the financial year. All the necessary advance tax payments or self-assessment taxes need to be paid by the legal heir out of the estate itself.
It is advisable that at least one to two bank accounts may be kept open for operation even beyond the estate settlement and distribution process for close to a year to 18 months. This would help to provide for any money due and received at a later date, which may have been missed in the distribution phase.
It is important for the individual handling this entire job to not let emotions influence any decision making and a qualified professional can be of immense help in this context.
The author is the chief planner at Dreamz Infinite Financial Planners.