Financial Plan prepared by me for Economic Times

http://articles.economictimes.indiatimes.com/2012-11-12/news/35067115_1_insurance-portfolio-endowment-plan-home-loan

Minor correction in investments to help Bansodes in achieving their financial goals

Amit Kumar, ET Bureau Nov 12, 2012, 08.00AM IST

 

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(The Bansodes need to increase…)

At first glance, there seems to be little that's wrong with the Bansodes' portfolio. The diversification in equity, debt and cash is near perfect, given their age, and they have an impressive savings rate. However, the family needs to finetune their investments and align them with their goals, while ensuring that it is backed by adequate protection. Barring one of goal, for which the couple will have to wait for some time to invest, the family is on course to achieving the rest with ease.

Ravindra Bansode, 41, works in the aviation industry and lives in Mumbai with his wife Sharmila, 39, his father Pandurang, 75, mother Kamal, 70, and daughters Ananya, 13, and Maahi, 8. Ravindra is the only earning member and brings in a monthly income of Rs 45,000. After accounting for their expenses, which include a home loan EMI of Rs 13,543, personal loan EMI of Rs 3,265 and an insurance premium of Rs 1,320 per month, they are left with a surplus of Rs 10,680 per month. The home loan was taken in 2005 and the current outstanding amount is Rs 10 lakh, while the personal loan is worth Rs 2 lakh and was taken earlier this year. This surplus will suffice for a majority of their goals, but the Bansodes must rearrange their insurance portfolio so that they have adequate protection.

To begin with, Shilpi Johri, CFP at Arthashastra Planning, suggests that the Bansodes build a contingency fund. Considering that Ravindra is the sole earning member, the family needs to secure themselves against temporary loss of income and should keep aside a contingency corpus that is worth three months of expenses and a year's insurance premium. They need to save about Rs 1.2 lakh, which can be arranged by allocating the existing fixed deposit and cash to this goal, and directing the surplus amount after investing for other goals.

The next most important task for the Bansodes is to buy insurance. Currently, Ravindra has only two covers, one of which is an endowment plan that gives a protection of Rs 1 lakh for an annual premium of Rs 5,220. The other is a term plan from LIC for Rs 25 lakh, which costs them Rs 10,625 a year. These are expensive policies and strain the tight budget of the Bansodes, without providing adequate cover. In such a situation, any mishap can seriously endanger their finances. Accordingly, Johri advises them to increase the insurance coverage to at least Rs 1 crore. They should surrender the existing plans and divert the premium saved, Rs 1,321 per month, towards this goal. The cover will cost them about Rs 1,500 per month.

Their health insurance portfolio is in better shape, not because they have a plan but because Ravindra works for a PSU and his entire family is covered against any medical emergency. As such, there is no need for him to buy a separate cover. Also, the family need not worry about a health cover after retirement as they will be covered under the Central Government Health Scheme for the rest of their lives.
 
The Bansodes have simple goals for the future, which include saving for their daughters' education and marriages, and their own retirement. To begin with, the Bansodes want to save Rs 8 lakh and Rs 10 lakh for the education of Ananya and Maahi after 9 and 14 years, respectively. For Ananya, they can use their existing direct equity portfolio of Rs 1.58 lakh, along with the equity fund portfolio of Rs 26,000, which will suffice for about half the goal. The Bansodes have shown a lot of trust in direct equity and have a portfolio of 20 stocks. Johri thinks the portfolio is too big for Bansodes to manage and, instead, they should focus on investing mainly in equity MFs.

For the rest, they need to start investing Rs 1,808 per month through equity SIPs. For their younger daughter's education, they must surrender the child insurance plans that the couple had bought earlier. This will give them about Rs 35,000. Such plans are an expensive option to invest for a child's future and the couple will save more by investing through equity SIPs, says Johri. The equity MFs will generate about 15% of the desired corpus, while for the rest, the couple will need to invest Rs 2,276 per month.
The next goal is to save Rs 15 lakh after 14 years for their elder daughter's marriage. For this, they can use their existing PPF balance, which will give them Rs 2.5 lakh. For the remaining amount, they can invest Rs 4,591 per month in equity funds. To save Rs 22 lakh for Maahi's marriage after 17 years, however, they will have to wait for some time as the existing surplus won't be enough. After four years, when the personal loan has been repaid, they can invest Rs 5,911 per month to compensate for the lost time.

For their retirement, the couple needs a corpus of Rs 1.1 crore in another 20 years. For this, their EPF balance will provide about 95% of the corpus, while for the balance they need to invest Rs 421 in SIPs. The couple is advised to direct future bonuses, which they currently use to pay the premium for child plans, to increasing the contingency fund.
(Financial plan by Shilpi Johri,CFP, Arthashastra Planning)

Shake up your dreams and Wake up for reality checks!

You can also read this article on personal finance website 'MyIris'. http://www.myiris.com/financial/storyShow.php?fileR=20121018090239715&secID=finan&secTitle=Financial&dir=2012/10/18

Ever saw an accident victim or met with someone who has lost his job? You may have felt sad for them. At the same time how much you wished and believed that this will not and can’t happen to you! More often than not you would wish to live in dreams where every wish of yours is successful and everyone around you is in good health. Life, however, is full of both pleasant and unpleasant surprises. In your dreamland, you may choose to deny and run away from the unfortunate incidents but in the real world they may catch you sooner than you think of. Surprises can’t be avoided but you can definitely prepare yourselves to face them when they happen. The best way is to do regular Reality checks.

Reality checks “question”everything what you believe will come true. They compel you to deliberate upon possible favorable and unfavorable outcomes of the developments happening in all aspects of your life i.e. be it personal, professional, medical or financial.

Here are some of the dreams and their financial aspects that need reality check!

1. Fortune of good health

When was the last time you went for a health check up?

Some people avoid it because they believe that nothing shall go wrong with their health. Some avoid them as they are too afraid of the results and wouldn’t want to face the doomsday. Both type of people are in state of constant denials. Doctors are concerned about how stress alone is causing to worsening health reports every year. Regular checkups can help you track your health and take corrective measures before small problems turn into bigger issues.  The amount of money you will spend on them will be much smaller than what you will be required to spend should they become large problems.

If you are in a corporate job, you can join the regular health camps covered inyour HR policies. You will be motivated by seeing your colleagues around and your family will be motivated to see you doing it. You can buy an insurance plan that reimburses preventive checkups at least once a year. Also allocate some part of your monthly budget for medical purposes. If it is not used, it will accumulateto build towards medical emergency fund. Always renew your medical insurance. Critical Illness like heart attack or cancer can completely drain you financially.Buy exclusive insurance policy covering critical illness. Try to get maximum coverage possible depending on your age and premium paying capacity. After all “Health is Wealth”.

2. Bliss of double income

As professionally qualified working couples do you think none of you will ever take a career break?

Women often take career breaks when they want to bring up children. Even men take sabbaticals to reflect upon their career progress or to deliberate upon possible career shifts. Some may be willing to take a break for pursuing entrepreneurial instincts. In all of these cases some part of family income gets discontinued. Obviously your lifestyle gets a jolt if one source of income dries up. This has a strain on personal finances, makes you anxious and compels you to mull over your decision again and again. By carefully planning your finances you can save a lot of trouble.

The important point to note is…’Plan your finances before you take the decision of career break’. Be able to visualize your life after the break has happened. Now write down all sources of income and expenditure both before and after the break. Differentiate between discretionary and non-discretionary expenses. Expenses like house rent, loan EMIs, school fees, regular household expenditure can’t be avoided. Also insurance premiums like life insurance, medical insurance, home insurance are unavoidable. You must prepare everyone in the family for some lifestyle modifications like reducing the number of outings and vacations, restriction on gifts, postponing purchase of high value items. The circumstances may force you to cut down on your yearly investments. In such cases allocate your investments as per your reduced risk taking ability. Also, your cash flow should include forthcoming expenditure in case of new additions in the family.

3. Ladder of continuous promotions

Are you sure of getting regular raises, bonuses and promotions in your career?

Tough economic conditions are making it difficult for the companies to match thebonuses and raises they used to give in the past. Promotions are slow and even deserving candidates are being left out. It becomes even more difficult when you climb up the corporate ladder. There are a too few positions for too many. It will be wise to keep a backup plan ready to handle disappointments.

The most important aspect of your financial back up plan is to avoid extrapolating your income on the basis of the highest raise you ever got. Rather take a conservative approach and make assumptions as per the industry average. Keep in touch with the job market to evaluate your financial worth. Even the entrepreneurs and freelancers should do it in case their venture does not turn out to be as profitable as expected by them. Examine if you will be able to amass enough wealth to take care of your retirement or children’s education and settlement. If not, then you should be mentally prepared to postpone your retirement or think of a way to generate secondary income.

4. Magic of affectionate relationships

Do you wonder why family court and relationship counselors exist?

Cases in family courts are rising every year and money is the major reason for it. A lot of married couples have disagreements about spending habits. Some even hide their full income and investments from each other because theybelieve their spouse to be unreasonably extravagant. There are some who assumes full responsibility of home finances and do not share issues like debt or financial losses. Such actions jeopardize the very foundation of the relationship i.e. Trust! It eventually leads to increasing number of arguments and fights. They land up with counselors and in extreme cases with the family courts. An open all inclusive communication on money matters can save a lot of troubles.

The key is to take all family members in confidence, which includes even your children! Everyone should be encouraged to participate in the budget planning every month. It will give them a chance to understand the financial situation of the family and adjust their expenses accordingly. Financial health checkups every year are the best way to avoid surprises. Such checkups are comprehensive in nature and detail out everything from your assets to liabilities, sources of income to reasons of expenditure, investments and insurances. Also regular ‘Financial Get together’ can simplify matters like inheritance as everyone will know ‘what to expect’ in advance.

5. Heaven of ever growing investments

Would you be shocked to see the actual monetary value that you can realize from your investments?

As an investor some people are firm believer of ‘long term investments’ and hardly revise their investments till the long term arrives! Some feel ‘magic of compounding’ will keep working for them and they will be rewarded with a huge sum of money for keeping patience. Patience is virtue but it alone cannot help you when it comes to finances. A carefully planned strategy is important to achieve your goals through your investments.

Always define the purpose, time horizon and return expectations of your investments. Revisit them at least once every three months. It is imperative to align your investments with your goals like kids college admission fees, down payment for buying house, vacations, retirement and the like. Purpose will help you formulate the entry and exit strategy and timing for your investments. Since everyone has unique situation and money psychology, invest only in those avenues which can give you a good night’s sleep. Stay away from becoming victim of fashion in personal finance.

Finally:

Reality checks will keep your dreams real!

Comprehensive Financial Planning exercise can help you inquire and investigate your dreams. It is a reality check which encompasses all of the above suggestions and much more. It is in-depth study of your overall situation. You will be required to write down your dreams and convert them into quantifiable goals. The action plans thus prepared will take you closer to your goals and hence to your dreams. Let all your dreams come true!

Traveling for work? Help your family cope with it!

Travelling for work may be unavoidable at times. Apart from work pressure there is pressure to adjust with the new surroundings and to fix the derailed personal routines. While you are yearning for the companionship of your spouse, laughter of your children and home cooked food, your family is missing you too. Your spouse is left alone to take care of the house and children along with their own professional commitments. There is tremendous emotional and physical pressure to keep everything up and running for them.

A frantic call from an anxious spouse and the wailing face of your child on a video call can give you sleepless night. You are left wondering as to how to ease their burden and release them from their woes as you need to be physically away to earn the living. Physical workload cannot be shared! Your spouse will have to take the children to school, get the things fixed up at home or entertain the guest alone. You may be an emotional support by communicating with them more often. However there are few more fronts to be taken care of, like, home finance. Assuming that you are the one responsible for the financial aspect of home management, here are few points as to how you can help your family even while being away.

You may already be doing your bit but answering the following questions before your travel can put everyone at ease.

1. Are your financial documents in order?

Your spouse need to open a bank account or your washing machine has broken down…what is the next step? Bank will demand ID proof and residence proof. As for your washing machine, warranty card and helpline numbers will be needed. What if your spouse could not dig out these important papers?

You could have helped your family by organizing various documents and keeping them up to date. For ease make a list of all your important documents like house and car registry papers, passports, voter ID cards, certificates of education, income tax returns, Insurance policy documents, medical insurance cards, pan cards, warranty cards for all major purchases. Scanned copy of these documents can be stored in Google docs and the like with no or nominal fees. Also one or two set of photocopies endorsed by concerned authorities can be useful.

2. Have you made all the payments?

Your son was watching his favorite cartoon when ‘services terminated because of non payment of dues’ popped up on the television screen and your spouse received a stern reminder about the maintenance bill of the house…why did this happen?

It happened because you kept on postponing the payments till the last date and between your crazy work schedules you forgot to pay them before going away. To avoid such delays, set monthly reminders on your mobile. Online or mobile payment options can be very convenient. High priority payments like Loan EMIs and insurance premiums can be done through ECS (electronic clearing service). Always leave few blank cheques signed by you at home if you are the one who signs the cheques. Blank cheques can be useful in cases like payment of insurance premiums which are to be done only by life assured or changes like amounts and dates.

3. Does your family have all required insurance covers?

Your father has fallen ill and has to be hospitalized or your car has met with an accident…How to tackle these emergencies? Medical treatment can be expensive more than you thought.  Accident has to be reported to the police and insurance company who will demand documents like car registration and car insurance.

Insurances are the assurance to reduce your monetary burden in case of mishappenings like death, accidents, illness or theft. However unlikely it may seem but such emergencies can happen to anyone anytime. It is always good to be prepared so ensure that your family has adequate life insurance, medical insurance, accidental insurance, professional indemnity insurance etc. Insure your house against calamities like earthquake or fire. Keep our vehicle insurances up to date. Most importantly, ensure that everyone in the family knows about them even your school going children. This can be one of the ways to educate them in home finance and also as they can play a crucial role in your absence.

4. How will you do your banking transactions?

Your wife has tried to access the locker jointly held by both of you but was denied the operation or you want to make prepayment for your house loan and bank has demanded your presence…can this be avoided?

Banks strictly follow the guidelines regarding customer identity, be it matching photographs or signatures. They do it to safeguard their customers against identity theft. In the cases where the customer cannot be present him/ herself, banks accept letter of authority issued in favour of relatives. The letter allows the bearer to operate in absence or in place of the customer. If you travel frequently such a letter can be of great help. Also if you are travelling for duration above a month or so, try to visit all your banks along with your spouse for better understanding of the transactions to be done in your absence.

5. Can they make purchases easily?

Your family decided to surprise you with an international vacation instead you get a call from them brimming with frustration…what would have gone wrong? They could not make the payment because of the lack of access to the desired sum (more than usual purchase routines) and their plan to surprise you was jeopardized.

It happens when one person handles all money and takes all big financial decisions at home. First and foremost, ensure that all sources of income, investments, expenses and liabilities are known to the adults (particularly spouse) in the family. Secondly they should have access, understanding and freedom to do monetary transactions in your absence, howsoever uninterested any of you may be! A credit card with a good purchase limit will ease their life. Nevertheless get a debit card instead of credit card, issued for the extravagant shoppers in your family! Handover all your membership cards like retail chain memberships or brand exclusive memberships to ascertain that you are still gaining the reward points and making your family happy.

6. Is your family travel ready?

Duration of your work got extended. Your family wanted to join you and you could not get them shipped to where you are working…who is to be blamed? Travel was not possible because your wife could not get visa approval just because your name was not endorsed on her passport.

The two most important documents for an international travel are passport and visa. Visa approvals are easy if your passports, identity proofs, resident proofs are in order. It is always helpful if you get name of husband / wife endorsed on your passport after marriage. Also documents like marriage certificate and birth certificate of your child can be crucial at times.

Finally:

Positive answers to the above questions can put you at ease. Even though it can be very exhaustive check list and a lot of work on your part, it is worthwhile, as everyone in the family will get to understand the financial management and will be allowed to play their roles.

All of the above points and much more are addressed during comprehensive financial planning exercise. A Comprehensive Financial Plan can help you organize your finances, analyze your current situation and plan for your future. The various checklists prepared during the development of the financial plan can act as references as each plan is as unique as your situation. 

What is your ‘Real’ reason for investing in ‘Real Estate’?

This article is also published at the site of Myiris.
http://www.myiris.com/financial/storyShow.php?fileR=20120903100449715&dir=2012/09/03

Buying a property or investing in real estate attracts more emotions than any other type of investment. The pleasure of living in one’s own home is immense. However ‘Investing in real estate’ is different than ‘buying a house to live in’. Both calls for different types of need analysis. Investment in real estate should be taken as any other form of investment options available in the market which should be looked at critically.

Explore and identify the ‘Real’ reason, as Real estate investing involves large amounts and is illiquid in nature. It may take you several months to realize the gains from these investments.  

Here are some reasons and suitable ways of investing in real estate.

1. To ‘live in’ at a later stage of life:

Needs change with life stage. ‘Later stage of life’ implies around and after retirement. Some may want to live at a quiet place away from the hustle and bustle of the current life. Some may be interested in living near their friends and relatives. Some may be interested in living near their grown up children. Religious places are also preferred for buying retirement homes. Overall you need a maintenance free, senior citizen friendly home with all basic amenities. Safety and security are also one of the concerns.

Consider the following points before taking a decision:

·         The property chosen should have a hospital in the vicinity as the need for medical assistance increases with the age.

·         Facilities like shops, parks, yoga and meditation center, club houses should be at a convenient distance.

·         Find out if the demographics of the other buyers is same as that of yours since after retirement you will have more time to spend with likeminded people.

·         Avoid higher floors and duplexes as climbing stairs will be inconvenient.

·         Keep the option of having tenants open if you decide to go for an independent house. It will be helpful if you are living alone.

·         Generally prefer to finalize the house closer to a city or a town as medical or other kinds of assistance may be available sooner. Retirement homes, nestled amidst greenery, away from city, may be inconvenient in day to day life.

·         Also in the course of life, you must have grown used to a certain lifestyle hence choosing a place very different from the current home may seem uncomfortable after sometime.

·         Size and layout of the house should be such that the maintenance and movement is easy.  

Gated condominiums around city will be the most suitable choice if above points are taken into account.  If you do not have immediate need, you can save on cost by choosing an under construction property which are usually priced lower than ready to move in properties. Apart from apartments, options of flexi homes and plots are also available within some condominiums.

2. To have a quiet stay once in a while:

Everyone aspires for a ‘Quiet stay’ once in a while. That means getting away from all the noises, traffic jams, ringing phones and daily struggles of life. Nowadays, this need arises more often than you think. And if your budget allows you can own a vacation home. You don’t necessarily have to expend in hotel bookings every time. Also, these homes can be let out to others when you are not using them, yielding some kind of secondary income for you.

Properties away from the city, easily drivable, are good options. Another option can be buying an agricultural land and then constructing a vacation home of your choice. You can be as creative as you wish to be. The other options can be buying property at tourist places like near beaches on hill stations or wild life reserves. Ensure to get all the necessary government clearances and approvals before making such an investment. After your vacation home is ready, a little investment into keeping a care taker is extremely useful.

As much as possible, try avoid taking loans for such a thing as they are lifestyle choices and not very sound investment options. It would be difficult to let it out for long continuous periods or to sell it out.

3. To generate regular income:

‘Rental income or income from lease’ qualifies for the ‘regular income’ from your real estate investments. You should not get lured by ‘Assured 12% returns on your investment in so and so property’ advertisements. They are just promotional in nature and don’t generate regular income forever. These can yield certain amount only initially till the time of possession and not afterwards. Investing into land is also not a good option as it will yield any regular income only when some construction is done.

You can buy a residential apartment/ floor/town house in tier-I or tier-II city which sees higher influx of people due to job opportunities. If you don’t ever plan to use it for your own use, then layout or number of rooms can be looked at very differently. A small 2 or 3 bedroom house would be a very good option. You can think of investing in service apartment, but ensure its nearness to the market place and/or business centers. Also arrange for a reputed service provider to maintain your service apartment.

Investing in a commercial property like a shop in a mall or office space can also be looked into. In general they are more expensive than residential properties therefore learn in advance about the companies interested in setting up a shop there. Since commercial properties are more often rented on per square rate, invest in smaller area(s). They can be rented easily.

4. To earn quick profits:

‘Quick profits’ can be earned through trading in real estate.

Invest in prelaunch offers and sell them once the property appreciates. You will be required to shell out only 5 to 10% of the value of the property hence it will allow investment in more than one property at a time provided your budget allows it. But realizing money from real estate takes time. The waiting period is usually 4 to 6 months in real estate trading.

Invest with a reputed builder only or you may lose both time and money if the builder delays the construction or does not start it all!

5. To get a lump sum amount:

‘Lump sum amount’ is the capital gain from the property earned on its sale. Generally people tie their goals like education or marriage with such investments. Therefore availability of money at the right time gains a lot of importance. In such cases you should not keep waiting to get the best price for the property. Instead you should sell it at least a year before to keep the money ready for the goal.

Following points can of help:

·         If your time horizon is 5-6 years, residential apartments in and around city are more suitable than plot or any commercial property, as the apartments get sold easily.

·         If your time horizon is 8 to 10 years than invest in an area far from a city, provided the city has expansion plans on the horizon. Tier-II cities can serve the purpose better because of the lower property rates in comparison to the tier-I cities. Areas near industrial belts are also good option as they attract various commercial activities later.

·         In case your time horizon is more than 10-12 years, explore investing outside the country as well.

Apart from investing as an individual, consider forming a group. Your group can buy a land and develop it with the help of a builder. If you have constructed apartments, profits can be made on the sale of each apartment.

Real Estate Investment Groups are one more way of group investing. They are usually set up for rental properties. While an investor may own one or more units, a professionally managed company acquires, builds, maintains and lets out all the units on the properties in exchange for a percentage of the monthly rent. You can sell off your units once they are ready.

6. To diversify the investment portfolio:

‘Diversifying investment portfolio’ implies investing in different types of investments like Shares, mutual funds, bonds, fixed deposits, gold, property. You may be unwilling to commit large amount to one particular class of investment.

REIT (Real Estate Investment Trust) gives you an opportunity to invest small amounts in real estate. REIT is a company that invests in real estate. REITs trade on all major exchanges. They use investor’s money to acquire and operate properties. They are highly liquid and you get exposure to both residential and commercial real estate investments.

Finally:

Real estate investment is a commitment of large amount of money for duration much longer than most of the other investment options. Most importantly, if you are planning to take loan for the investment, make sure that EMIs should not become a burden in future.

Do not hurry; invest only when your real reason and requirements are fulfilled!

(You may want to look at my earlier written article ‘Road to buy your dream house’ on the blog for need analysis of buying a house to live in)

Rushing for ‘upto 50% sale’…ask before the task!

Oh my God they have 50% off!!!...Go to the malls nowadays and you can hear the thrilled voices and see a lot of excited faces. If you also belong to these exited faces, answer next few questions before you head for the payment counter.

1. Do you really need it?

If you think you are stocking for the year, go through your last year’s stock and don’t be surprised to see the stuff lying in the back of your cupboards and utility rooms. You are only adding to the pile if you are not going to use it in next few months.

2. Would you really save some money?

If you are eager to grab the ‘3 for 2’ offers, ensure that 2^nd and 3^rd ones are a welcome addition and that you don’t convince yourself unnecessarily to buy them. You shall save more if you buy one and avail 10% discount than if you buy more than one and end up never using them.

3. Would you get exactly what you needed?

If you have entered the shop with the hope to find your long desired product at a lesser price, make sure you do not compromise on it. During sales, you may mostly be disappointed about the mismatch of your demand and the displayed product. You may not be able to get the size, colour, design, usage etc so desired by you. You shall be more satisfied to pay a higher price for what you wanted than the discounted price for what is available.

4. Did you pick up the items with discount only?

If you trust the stores to keep separate sections of discounted and fresh products than remember the caveat ‘buyer beware’! They often mix up all types. You should confirm about the discount before making the payment. You do not enjoy the benefits of sale if you buy items not on discount.

5. Have you examined the item thoroughly?

If you believe that the stores come up with sales to clear off the inventory, you have misconstrued it. You may find rejected items mixed up with the good conditioned ones. You may still be able to bear the burden in case of low value items like apparels and shoes but high value items like white goods need more careful examination before buying.

Now ‘shop till you drop’ if you are convinced with your answers. Otherwise you shall be saving more without rushing for ‘upto 50% sale’.

Who should get your money...Needy or Greedy?

How many times have you heard and ignored that one of your friends or neighbors is fighting a court case for inheritance? Your immediate reaction could be a ‘sigh of relief’ imaging your loving family. It is hard to imagine parents, children, spouses, siblings fighting over money.

 But if your friend’s uncles can fight over money, why can’t your children’s uncles?

Times have changed! We are no longer living in a world where people had limited needs and were contented with the limited means. Needs have increased and so are the expectations, not only from self but also from others around. More importantly people are more vocal about their expectations.  These needs, fears, anxieties, influence, expectations, lifestyles and insecurities can bring unexpected changes in a person’s behavior.  Sweet relationships can turn sour. And when you are not around (residing in heaven of course!) to interfere and correct the expectations, things can go really wrong. Emotionally stressed dependents can get sidelined by more vocal and dominating heirs and relatives. Hence if you want to dispose your assets as you wish, you should express it not only verbally but also in writing.

Writing a WILL can help you do so. After all, the question is who should get your hard earned money…Needy or Greedy?

Here are some reasons as to why you need a Will and how it can help you.

1. A Personalized Document:

A Will is an absolutely personal document. At no point of time you can be asked to produce your Will. It comes in to the effect only after the death of the person writing the Will, the ‘testator’. You have full control over the Will as it is revocable ie, you can alter the terms, make changes or cancel it as and when you like.

It can help you express and clarify your opinions, feelings and relationships to everyone related to you. You can attach reasons for doing a certain deed and leave the message. Your words may be forgotten and ignored but your writing will not be!

2. A Legal Document:

A duly written, witnessed and registered Will is a legal document. It cannot be contested if ascertained to be the last Will of a person. If the Will is witnessed by a doctor, it cannot be challenged on the grounds of ‘written by an unsound mind’.

Judiciary will ensure that your wishes are respected and executed in your absence.

3. Ensures clear disposition of assets:

A Will can help in avoiding confusions and disputes. You will be able to ascertain the manner and extent of the disposition of your assets. There can be special needs or requirements of the members of a family, Will ensures that they are being taken care of. It provides more room than the laws of inheritance.

Special circumstances in the family may need special attention. Some near and dear ones may need more attention than others, like, physically or mentally challenged member, invalid parents, widowed daughter or sister, a friend in need, live in partner or even a faithful servant. Some heir may be capable enough to take care of themselves, hence may not need full share of bequeath. Also you yourself may not be willing to share your wealth in case of estranged relationships. Everyone may be equal in the eyes of Law but you can maintain the uniqueness of your relationships and create the difference!

4. Can help in appointing a guardian:

A Will allows you to appoint a testamentary Guardian for the minor children. You can also define the wishes as to how would you like your children to be provided for. The guardian will take the full responsibility of the children and will execute it as per your wishes. Of course, it is very important that the guardian so appointed should be willing and capable to take the responsibility.

 Nowadays when most of the families consist of parents and minor children only, the absence or incapacitation of parents can leave the children ‘alone'. They are left vulnerable and helpless. Someone may be more interested in taking control of your money than the responsibility of your children. Sometimes there may be fight for the custody. In extreme cases No one may be interested in taking care of the kids. Hence make No assumptions and guard your children’s future in black and white.

5. Will supersedes nominations and successions:

Will overrides the provisions of nomination and laws of inheritance.

The popular belief that appointing a nominee in your financial transactions will ensure the smooth transfer of your assets is a ‘Myth’. Let’s see how it happens in India.

The debate of who will get the money does not end with mere nomination because legally nominee is just the ‘trustee’ of your assets. Legally the money will be divided as per the succession laws of the religion followed by the deceased. Also there are different rulings regarding different types of assets like bank accounts, insurance policies, shares, PPF etc. Let’s see some cases;

When the Nominations are done: In case of bank account, insurance policies, bank locker and real estate the nominee is considered as the trustee and the legal heirs can make the claims. But in case of stocks, shares and demat accounts the nominee is not just a trustee. He/ she is entitled to the entire sum being nominated in his/her favour. As per a recent ruling by Bombay High Court, the legal heirs cannot claim any amount generated from the sale of such shares.

In case of PPF accounts, it is important to have nomination. In the absence of the nominee the heirs get only 1 lac from the PPF account on the showing the succession certificate and death certificate. There is a very tedious process after that to claim the rest of the money from the PPF account.

When the laws of inheritance are applied: If you are a Hindu, your assets will be disposed as per Hindu Succession act 1956. Which says,  that in case of a Hindu male the assets should be equally divided between his wife, mother and children, even if he may have nominated his wife as the ‘sole’ nominee. Afterwards the mother’s share can be claimed by her heirs like her husband and other children. So even if the need and the wishes were to provide for the financially dependent wife, the case may not be so.

For Muslims the division of assets will be dictated by Muslim personal Law. Also Shias and Sunnis have different laws of inheritance. For Christians the Indian Succession Act, 1925 will be applicable. Parsis have a different law of inheritance.

As you can see that there is no One ruling on this matter. And a Will is one such document which can steer you clear of the legal maze!

 One document from you can safeguard the interests of your loved ones. You can help them take pleasure in your legacy. This one piece of paper can help you curb and correct the expectations even in your absence.  Let the greedy ones get the lesson!