Tomorrow is guaranteed to come. Will you live to see tomorrow? Unpredictability of life, events like pandemic are all unexpected. The only thing that’s within our control is the actions we take to financially secure and ensure protection for our loved ones. Have you considered the importance of nomination, the necessity of estate planning? It may not be a subject, you hear popularly but it’s important and here’s why. 

1. Nomination

When you purchase any financial instrument, you’ll be probed to nominate a second holder. This could be your EPF/PPF savings, mutual fund or insurance policy. Why do they ask to name nominees? If something were to happen to you tomorrow, can nomination secure ownership for your loved ones? If you’ve nominated them, it assures them the benefit, but it does not guarantee ownership. A nominee is a caretaker who has the right to allocate the resources to its rightful heir. 

If nomination is not the secured path, what should one do?

Estate planning is a legal way forward to distributing your assets to the rightful heir. 

Ways in which you can plan your estate:

1. Write & Register A Will

A will can be drafted on a simple piece of paper, signed and proved for authenticity by 2 witnesses. However, registering a will binds your wish and allocation of resources legally. This ensures the rightful heir and beneficiaries receive the assets under the conditions and preferences willed by you. This prevents any probable dispute in your absence as the framework for asset division is already in place.

2. Open a Joint account

A joint account is a great way to co-own an estate. A dark horse in estate planning, joint account provisions the primary and secondary holder with equal ownership of the estate. In case of an untoward occurrence, the secondary holder retains the ownership to the asset. The only drawback with this instrument is that you need to be extra careful when entrusting someone with joint ownership.

3. Build a Trust 

To build a trust, three parties are involved – a trustor, beneficiary and trustee. A trust is a legally binding deed that entails a trustee to hold and transfer assets to a beneficiary as intended and willed by the trustor.

In simple terms,  

A Trustor 

He creates the trust.  

Trustee

Takes the responsibility of managing the trust as intended by the trustor

Beneficiary 

The heir/next in line owner for whom the trust has been created 

For anyone to create a trust fund, following guidelines need to be followed.  

1. Define the purpose/trust articles, the beneficiaries and trust fund benefits with utmost clarity 
2. Transfer the objects of the trust fund to the trustee. Keep in mind this action is irreversible.

When you identify your current financial instruments and draft a plan with your advisor, you are able to make an informed decision on the benefits that get distributed. 

Let the experts do the job

Estate planning may seem like an added task. Something you can do on your own. Or an activity you feel, you should save cost on. It’s the contrary. Estate planning is a crucial aspect of your financial plan. You do not need to wait to save finances in large chunks or retirement age to consider estate planning. You can write a will as early as your legal age. Bunk the myth that estate planning is only writing a will. It is a framework that answers who will get what, when, why and how much.