Wealth beyond your Life: What is Estate Planning?

September 25, 2015, Chennai

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*Saroja’s foster father – Maniam, passed away last year at the age of 94.

He was survived by his wife who is 91 and a daughter - Vinita, who is 68. The daughter lives in USA with her husband and a son. Saroja is my client and brought this atypical case to me. 
A retired army officer Mr. Maniam spent a long term in retirement. He spent his retired life investing in the market and had also been educating Saroja and her sister in life skills and financial markets. What was revealed after his demise was unexpected. The family has been receiving dividend warrants, mutual fund statements which they couldn’t trace to any listed assets. When Saroja sat down to estimate the worth of these untraceable assets – she couldn’t believe herself. It was to the tune of 3 crores. Turns out that Mr. Maniam had been investing in shares and mutual funds in his and the names of his spouse, siblings and their children. Few of those siblings are not alive either. Although Mr. Maniam wrote a will before his demise but these financial assets have different names and PANs. The family has approached us to sort it out for them. The transmission of each of these assets brought the fallacies of inadequate estate planning.
The perception that estate planning means just drafting a will or creating a trust is misplaced. A will is not enough for seamless transfer of assets to the heirs. It is an ongoing process and should be started as soon as one has any measurable asset base. It also requires that as life progresses and goals shift, the estate plan should move to be in line with new goals. An efficient and successful estate plan also includes provisions to make sure that the family members can access or control the assets without much legal troubles. Lack of estate planning can cause undue financial burdens to loved ones. 
There are various tools that can be used to implement an efficient estate plan:
1) Will: A will is one of the main aspects of every estate plan. Will is not meant for the rich alone. Write a will, as soon as you have some assets to ensure that the transmission is done according to your wishes. Dying “intestate” or without a will can be costly to your heirs and leaves no say over who gets your assets.
2) Power of Attorney(s): Alzheimer disease, coma or any other disease may incapacitate  an individual  mentally.  Assign a person ‘Power of Attorney’ (POA), who will act on your behalf in the event of your disability. It can give your agent the power to do your financial transactions and other legal decisions as if he or she was you. In the absence of a POA, a court may be left to decide what happens to your assets. 
3) Nominations / Beneficiary Designations: Most of the financial assets can pass to your heirs without being mentioned in the will. That is where joint accounts and nominations play a vital role. All the investments should contain a nominee / beneficiary. Have a joint account holder, wherever possible. 
4) Letter of Intent: Create a letter of intent for your executor or a beneficiary regarding what you want to be done with a particular asset after your death or incapacitation. 
5) Healthcare Power of Attorney: With this you assign another person (your spouse or family member in most cases) to make important healthcare decisions on your behalf in the event of incapacity.
6) Guardianship Designations:  If you have minor children or are considering having children, picking a guardian is very important as this assures that your children will be into safe hands after you have left. If not, then it will all depend on the court’s decision which you wouldn’t have approved. Also it is quite a tedious process. A will is the best place to name guardians for your children. 
The bottom line is that it’s important to have a basic estate plan which could ensure that your family and financial goals are met after your support has left them.  By discussing your estate plans with your heirs, you help dispel potential conflicts after you’re gone. There is much that can be done for your family’s security and well being while alive than later.
A financial plan without estate planning is incomplete. Look for advisors who can look beyond the commissions on your investments. A Family Finance Coach / Adviser should be able to tie all threads of your financial life. 
Renu Maheshwari is a SEBI Registered Investment Adviser and practices Financial Planning and Portfolio Management. She is an MBA (Fin), CFP, CPFA and CFA-1. With over two decades of experience in the finance industry she excels in coaching, consulting and advising clients on personal finances. The initiator of WoW-‘Women only Workshop on Personal Finance’, she co-founded Finscholarz in 2012, to promote a holistic consulting practice. Unique, innovative, client centric model practiced by Finscholarz is her brain child, that has already altered many lives. You can your queries to her at ‘enquire@finscholarz.in’.
*Names changed to protect the privacy of people

*Saroja’s foster father – Maniam, passed away last year at the age of 94. He was survived by his wife who is 91 and a daughter - Vinita, who is 68. The daughter lives in USA with her husband and a son. Saroja is my client and brought this atypical case to me. 

A retired army officer Mr. Maniam spent a long term in retirement. He spent his retired life investing in the market and had also been educating Saroja and her sister in life skills and financial markets. What was revealed after his demise was unexpected. The family has been receiving dividend warrants, mutual fund statements which they couldn’t trace to any listed assets. When Saroja sat down to estimate the worth of these untraceable assets – she couldn’t believe herself. It was to the tune of 3 crores. Turns out that Mr. Maniam had been investing in shares and mutual funds in his and the names of his spouse, siblings and their children. Few of those siblings are not alive either. Although Mr. Maniam wrote a will before his demise but these financial assets have different names and PANs. The family has approached us to sort it out for them. The transmission of each of these assets brought the fallacies of inadequate estate planning.

The perception that estate planning means just drafting a will or creating a trust is misplaced. A will is not enough for seamless transfer of assets to the heirs. It is an ongoing process and should be started as soon as one has any measurable asset base. It also requires that as life progresses and goals shift, the estate plan should move to be in line with new goals. An efficient and successful estate plan also includes provisions to make sure that the family members can access or control the assets without much legal troubles. Lack of estate planning can cause undue financial burdens to loved ones. 

There are various tools that can be used to implement an efficient estate plan:

1) Will: A will is one of the main aspects of every estate plan. Will is not meant for the rich alone. Write a will, as soon as you have some assets to ensure that the transmission is done according to your wishes. Dying “intestate” or without a will can be costly to your heirs and leaves no say over who gets your assets.

2) Power of Attorney(s): Alzheimer disease, coma or any other disease may incapacitate  an individual  mentally.  Assign a person ‘Power of Attorney’ (POA), who will act on your behalf in the event of your disability. It can give your agent the power to do your financial transactions and other legal decisions as if he or she was you. In the absence of a POA, a court may be left to decide what happens to your assets. 

3) Nominations / Beneficiary Designations: Most of the financial assets can pass to your heirs without being mentioned in the will. That is where joint accounts and nominations play a vital role. All the investments should contain a nominee / beneficiary. Have a joint account holder, wherever possible. 

4) Letter of Intent: Create a letter of intent for your executor or a beneficiary regarding what you want to be done with a particular asset after your death or incapacitation. 

5) Healthcare Power of Attorney: With this you assign another person (your spouse or family member in most cases) to make important healthcare decisions on your behalf in the event of incapacity.

6) Guardianship Designations:  If you have minor children or are considering having children, picking a guardian is very important as this assures that your children will be into safe hands after you have left. If not, then it will all depend on the court’s decision which you wouldn’t have approved. Also it is quite a tedious process. A will is the best place to name guardians for your children. 

The bottom line is that it’s important to have a basic estate plan which could ensure that your family and financial goals are met after your support has left them.  By discussing your estate plans with your heirs, you help dispel potential conflicts after you’re gone. There is much that can be done for your family’s security and well being while alive than later.

A financial plan without estate planning is incomplete. Look for advisors who can look beyond the commissions on your investments. A Family Finance Coach / Adviser should be able to tie all threads of your financial life. 

Renu Maheshwari is a SEBI Registered Investment Adviser and practices Financial Planning and Portfolio Management. She is an MBA (Fin), CFP, CPFA and CFA-1. With over two decades of experience in the finance industry she excels in coaching, consulting and advising clients on personal finances. The initiator of WoW-‘Women only Workshop on Personal Finance’, she co-founded Finscholarz in 2012, to promote a holistic consulting practice. Unique, innovative, client centric model practiced by Finscholarz is her brain child, that has already altered many lives. You can your queries to her at ‘enquire@finscholarz.in’.

*Names changed to protect the privacy of people