By Riju Mehta
Goodbyes are the hardest when they are final. It’s worse if it involves one of your parents. The heartbreak is probably lesser in intensity only to that of your surviving parent, the spouse who is left grappling with a crippling emotional void at the fag end of life. Yet, it is critical to take a financial reality check and you, as progeny, are the best suited to do it.
Taking stock of the finances is an overwhelming task and it’s easy to be stumped by the maze of formalities. Where all the financial documents are? What if your father hasn’t left a will? Is your mother a nominee in the bank account? What documents are needed to close or transfer an investment? Should you continue to file tax returns on behalf of your father?
These and many other queries are faced by countless people, who go through painstaking processes to get their parents’ financial affairs in order after one of them passes away. Inability to locate documents or passwords, ignorance about procedures and legalities, absence of a will or lack of pre-emptive steps like appointing nominees are among the various reasons that people face problems.
“Often, if the husband passes away, the woman is left paralysed and it can take up to six months to wind up all the tasks,” says Priya Sunder, Director, PeakAlpha Investment Services, who has handled several clients in similar circumstances.
A good solution is to consult a lawyer and a financial adviser, who will ensure that you circumvent procedural oversights or errors and guide you through the entire process with minimal pain. We, at ET Wealth, are undertaking a similar exercise and will try to address your concerns by offering a step-by-step guide that will help you navigate the essential financial tasks.
Step 1: Get multiple copies of death certificate
This is the first and most crucial step since the death certificate will be required at all the financial institutions where you want to close accounts, transfer assets or investments, make a claim, or even sell the deceased’s assets.
“Remember to take adequate number of copies and get them attested, if required,” says Jayant Pai, Head, Marketing, PPFAS. “In case the death is in abnormal circumstances, obtain the relevant coroner’s report, autopsy report and a letter from the police station,” he adds. Every death needs to be reported and registered within 21 days in the prescribed reporting forms.
If the parent passes away at the hospital, you will have to fill a form with details like the deceased’s name, age, father or mother’s name, address, etc. This is forwarded to the registration centre/zonal office of the local municipal body, from where the death certificate is issued in the specified time. For multiple copies, download these from the municipal website.
Make sure these details are exactly the same as in your parent’s official records like the Aadhaar or PAN card. A spelling mistake or a name written with initials instead of the full name can cause problems. Meenakshi Das, 40, who lost her father in 2016, knows this well.
“My father had cancer and suffered a heart attack. It was all over within half-an-hour and everything happened so fast that we wrote my dad’s initials instead of the full name and misspelt my grandmother’s name in the form,” she says. The hospital refused to forward the form and it took more than a month to sort the issue out.
Meenakshi Das, 40, Delhi father passed away in 2016
Problem Faced: Issuance of death certificate by hospital & MCD.
Reason: Used father’s initials instead of full name; misspelt grandmother’s name and couldn’t furnish proof.
Problem faced: Closure of bank account.
tep 2: Get succession certificate if there’s no will/nominee
As a next step, locate the will, if there is one. The importance of having a will cannot be over-emphasised because of the ease it offers in sorting financial matters after the death of a parent. It clearly defines how all assets are to be distributed, to whom, by whom, and minimises disputes within the family.
Having nominees is also a big help in transferring some movable assets like bank deposits or investments with the help of death certificate and nominee’s identity/residence proof like Aadhaar and PAN card.
More so if the nominee is the surviving parent with valid identity proof. “In all accounts which comprise movable property, the will overrides the nomination,” says Sunder. “Only in case of trading (demat) account, the nominee prevails over a will,” she adds.
Remember that “nominees don’t have legal rights and are only representatives of legal heirs,” says Keerit Shah, Senior Lawyer & Partner, Dhru & Co. “If the parent dies intestate, you will need a succession certificate, which is valid only for movable assets, and can be obtained from a district court,” he adds.
This certificate is a must if there is neither a will nor a nominee, or both the parents pass away without a will. In case of immovable property like real estate,it is divided as per the religion or country’s law, among all legal heirs. “If the children do not want a share in it and want to transfer it in their mother’s or father’s name, they will have to sign a release deed, surrendering their share in property,” says Shah.
“If there is a will, the executor does the needful and announces the bequests to all beneficiaries at the same time,” says Pai. “Also remember that a will is probated in some of the states,” he adds.
Mumbai-based Ritesh Sharma, 42, is familiar with the advantages of having a will. “My father got a registered will with the help of a lawyer, clearly listing the distribution of assets, and we faced no problem in transferring the property to my mother’s name,” he says.
Step 3: Locate all financial documents
The next crucial, and difficult, task is to locate and identify all the financial documents of your parents. It helps if your father or mother is organised and has already arranged various papers systematically under different heads. If not, be prepared for a long, tedious process of collating and sorting all the documents.
Mumbai-based Meenal Verma, 24, knows the pain of a disorderly documentation. Her father, 72 at the time, died in 2014, without a will and all the papers were in a disarray. “Till date, I haven’t been able to locate all the investment papers. I keep coming across these randomly from time to time. Besides, all equity investments were in the physical form, not digital, and I had to convert these into electronic form. We have suffered losses in case of some stock investments because we couldn’t trace the relevant documents,” she says.
“To make it easier, you can divide the documents into four buckets: assets, liabilities, expenses and income,” says Sunder. These will include bank-related papers (savings accounts/deposits, ATM cards, credit cards), insurance (life, health, motor vehicle), investments (insurance, stocks and mutual funds, savings schemes like Senior Citizen Savings Scheme or NSCs, and fixed deposits), utility bills and account numbers (electricity, water, gas, phone, Internet), taxation, property papers, loan and EMI documents, clubs and other memberships, among others.
Priya Sunder, Director, PeakAlpha Investment Services says, “To make sorting easier, divide the documents into four buckets: assets, liabilities, expenses and income.”
“Don’t forget to look for employment documents, if your father or mother was still working. Often, people fail to contact the employer and get the insurance and other benefits due to your parent,” says Sunder. “This money can be particularly important and useful if the income source has been cut off due to death or in procedural delays,” she adds.
Step 4: Make a list of dues & liabilities
A corollary to organising financial documents is preparing a list of all liabilities, some requiring immediate attention. “While some payments are automated through ECS and don’t require monitoring, there are others that are not and have to be paid immediately. This is why it is critical to take note of the regular and other expenses,” says PeakAlpha’s Sunder.
The list of typical expenses include utility bills (electricity, water, gas, phone, Internet), credit card dues, insurance premiums, mutual fund SIPs, advance and other tax dues, loan EMIs, subscriptions and membership fees, among others. This is where joint bank accounts and nominations are useful since you can keep using the account to make immediate and crucial payments.
Be particularly careful about credit card payments or overdraft loans since these are expensive and wives are usually not aware of these. The electronic notices would usually come in the mail and the spouse may not be checking these. “If you are not in the know, these can keep collecting interest and bloat a lot,” warns Sunder.
Step 5: Notify financial institutions
The next big step is to intimate and inform all relevant financial institutions of the demise. These will include banks, insurers, companies where investments have been made, tax department, and utility bodies. “You also need to inform all creditors including banks (credit cards), home loan/personal loan company, etc,” says Pai.
Notifying these organisations is important because you will have to close single accounts,or have the name changed.
Remember, however, that the timing is important here. In the case of bank accounts, for instance, you may require access to money for making immediate payments or receiving insurance/annuity benefits in the deceased parent’s name. If you inform and have it closed prematurely, you may run short of money, or have no account to receive the money in.
Also, if the locker is attached to the account, it will be frozen too and you won’t be able to access its contents. In case of investments, you may cut off the income stream.
At the time of notifying, understand the procedure of closing or shifting. Make a list of the documents you will need and the people who should be present to conduct the formalities. Otherwise, you will have to run back and forth to secure the relevant papers and proofs, delaying the entire process.
Step 6: Close or transfer accounts
“Check out the procedure for making a claim or effecting other changes. Every institution has its own procedure and it is advisable to familiarise oneself with it,” says Pai. Here’s what you need to do in the case of different organisations:
Bank account: In case of a joint account or one with a nominee, you will have to close it and open a new account for the surviving parent. The money will be given to the joint account holder or the nominee. It’s not a complicated procedure and all you require is the death certificate and identity and residence proof of nominee (Aadhaar, PAN card, etc).
It’s better for the parent to have the new account jointly with the child or the latter as a nominee. In case of a single account in the name of a parent, you will have to close it and have the proceeds transferred to the nominee as above. If there is no nominee, the amount will pass on to legal heirs for which you will have to procure a will, or in its absence, succession certificate. As for credit cards, repay the due amount before closing it or the interest will continue to accrue. Cut the card carefully before disposing it off.
Loans: If the borrower had a cosigner, or joint debtor, the latter is responsible for repaying the loan, and if he is unable to do so, the lender can file a lawsuit to procure the payment. In case of a single borrower, the lender can file a lawsuit to procure the payment. In case of a single borrower, the executor of the will is responsible for settling debts. If there is no will, an administrator is appointed by the court to deal with the deceased’s debts.
Life insurance: In case of a term plan, the nominee will receive the maturity proceeds on producing the death certificate and identity proofs. In case of traditional or annuity plans, you will have to make a claim by intimating the insurer and providing a death certificate.
In some cases, the nominee(s) may have to physically go to the office where the policy was bought in order to make a claim and obtain the maturity proceeds. “It is best to notify at the earliest because life insurance claims can take anywhere from 45 days to six months to service. Make sure you have the right documents to hasten the process,” says Sunder.
Health insurance: If you hold a family floater plan, you will have to remove the name of the deceased while renewing the policy and a fresh policy will be issued in the name of the surviving parent. Again, you will have to furnish the death certificate.
While making a claim at the hospital where the parent passed away, take note of the documents that the insurer will need from the hospital. Mumbai-based Siddharth Shah, whose mother passed away in 2015, had to go back and forth between the hospital and insurer several times before he could secure the reimbursement.
Siddharth Shah, 28, Mumbai, mother passed away in 2015
Problem faced: Getting a reimbursement for the health insurance claim.
Reason: The insurer kept asking for various hospital documents and they had to go back and forth several times.
Time taken to resolve: 30 days
Vehicle transfer: You will have to transfer the ownership of the vehicle by making an application to the original registered authority by the legal heirs or the person succeeding to the possession of the vehicle, along with the required documents. These can be checked at the website of the transport department of the respective state.
Utility bodies: If the gas, telephone, etc, were in the deceased parent’s name, you will have to get the name changed by producing the death certificate, identity proofs, declaration by legal heirs and NOC by other heirs, as well as other specified forms. It’s best to go the service provider’s website and check all the forms needed before approaching them.NOC by other heirs, as well as other specified forms. It’s best to go the service provider’s website and check all the forms needed before approaching them.
Investments: For transferring investments other than property, you will have to fill up the specified forms and produce a death certificate as well as identity/residence proofs if you are a nominee or a legal heir. Otherwise, you will have to get a succession certificate
Step 7: Check income and investments
The death of a parent means that the surviving spouse’s financial plan will change due to the alteration in the holding pattern of investments. Since the joint accounts will change to single accounts, the permissible limit of investment will fall, affecting the inflow.
The sudden termination of active employment of the spouse can also result in a drastic fall of income. But even if the spouse was not employed, the conversion of joint accounts to single accounts means that the investment amount will exceed the permissible limit. For instance, in the Senior Citizen Savings Scheme, changing a joint account to a single account can bring down the limit from Rs 30 lakh to Rs 15 lakh.
Till the time this amount is invested afresh in an avenue that can generate better returns and is more tax-efficient, the income will be slashed. This also means that expenses will have to be curbed to adjust to the new flow of income. “For instance, if the husband had a club membership, where only he went, this expense can be easily slashed. Or if they were taking three newspapers, it can be brought down to one,” says Sunder.
The financial flow can also increase as the maturity proceeds from life insurance, pension plans or employment benefits start to flow in. If the income stream is affected, you will have to look for new avenues of investment.
“Be careful that your parent is not taken advantage of by relatives and friends at this point. Many a times the distraught spouse is made to sign on investment documents that can rob him or her of the accrued financial benefits,” says Sunder.
If the spouse, typically woman, was not in the know of financial dealings, she will either have to start taking an interest and managing it herself, or you will have to handle all her finances for her.
Step 8: File tax returns on parents behalf
This is a task that can be easily overlooked, but needs to be done. “The income tax return has to be filed by you as a legal representative for the financial year in which the demise took place and till the date he/she was live,” says Sudhir Kaushik, Director, Taxspanner.com.
“The filing is mandatory if the gross total income from all sources is above Rs 2.5 lakh below 60 years of age, Rs 3 lakh for 60-80 years and Rs 5 lakh above 80 years. The return can be filed for last two financial years,” says Kaushik.
Sudhir Kaushik Director, Taxspanner.com says, “The tax return has to be filed by you as a legal representative for the financial year in which the demise took place.”
You will also have to attach the death certificate, yours and parent’s PAN cards, legal heir certificate and a notarised affidavit along with the return. After filing the return the PAN card will have to be cancelled by physically going to the income tax office. You will need to fill the cancellation form,submit a letter including details of the deceased and a copy of the death certificate, to the income tax assessing officer.
If the return has not been filed for earlier years, you will have to contact the local income tax office and write an application for condoning the delay in filing return. The commissioner can allow or reject the application of filing the belated return of more than two years, says Kaushik.
Step 9: Protect your parent’s identity
Last, but not the least, don’t forget to erase important documents and online presence of your parent. Cut out the ATM or credit cards as well as other physical financial documents with personal details that are no longer needed in such a way that numbers and details are incomplete.
Also close e-mails and social media accounts because if people comment about the demise, this information can be misused. “Criminal-minded people or strangers can access these and use the details for the wrong purpose, which may result in financial loss,” says Sunder.
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