Rachit should take steps to ensure that, in the unfortunate event of his death, the money he is saving for his financial goals is made available to the right people at the right time. Nomination and joint holding are two of the simplest ways of identifying beneficiaries for investments.
As far as possible, Rachit should make sure that the beneficiary is someone whose needs will be taken care of by the specific investment in the future. For example, he can earmark some of his mutual fund investments for his daughter’s foreign education, and make her the nominee. Similarly, his parents can be the nominees for his investments in fixed deposits and small savings schemes, while his wife can be the nominee for his insurance policies. By doing so, he will make sure that the funds earmarked for his dependants’ needs will be made available to them, without the stress of disputes, even in his absence.
It would be good if Rachit maintained a dossier of his investments and kept track of the nominations he has made. If he makes any changes in nominations, he should update this record so that there is no confusion. Since situations and needs change, reviewing the nominations periodically is a good practice to ensure that it continues to be relevant. Informing the nominees that they have been made beneficiaries is also a good exercise since the purpose of making smooth transition will otherwise be lost. If there is a provision for having more than one joint holder or multiple nominations in a product, he must use it so that the investment is protected even if one nominee passes away.
If Rachit plans to write a will, he must make sure that the provisions of the will are in line with the nominations he has made. If not, it will lead to disputes and the contents of the will can take precedence over nominations. By taking all these steps, Rachit can make sure that the financial interests of his family are protected even if he is not there to manage it.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.