Suddenly Single – Financial Issues in Death

A death in a family is bound to have financial repercussions; more so, if the deceased was an income earner. The emotional aspects aside, life goes on. The survivors have to pick up the loose ends and get back to the business of life. To set their lives in order, they will have to take care of certain important aspects.

First thing, on anything to do with the deceased’s finances, the survivor will need to prove authenticity to the claim of death. This is done by getting the death certificate. This is one document which will be required at all places. One will need to keep a few originals and several notarized copies of the death certificate.

For the nominee or any other legal heir who will be receiving any part of the payout of the estate, each organization will ask for fulfillment of Know Your Customer (KYC) norms. This would mean providing a proof of identity, proof of address and PAN card. These documents should be kept ready.

One will need to collect all the papers of the deceased regarding his insurance and investments. A list of organizations which need to be approached for claiming all monies and settling all liabilities needs to be made. Each financial transaction will require different forms and papers to be submitted. Once all the information regarding what needs to be done is collated, it becomes easier to complete the paperwork and submit it to the respective organizations.

Insurance

If the deceased was hospitalized, health insurance paperwork needs to be completed. There might be reimbursements to be received from the health insurer, for which papers need to be submitted. For this purpose, all the hospital bills, details of the treatment provided, doctor’s certificate with the reason of death etc needs to be provided. These activities are usually time barred. All this paperwork needs to be completed in the time specified by the insurer, which in most cases is 30 days.

Critical illness policies usually pay if the insured has survived a minimum number of days after the first diagnosis of the illness was made. Most policies define this survival period as 30 days. In case death has occurred after 30 days of diagnosis, the policy will pay, else it will not.

In case of accidental death, personal accident policy will also pay. This can either be a policy from a general insurance company or a rider in a life insurance policy. In case of policy from general insurer a separate set of papers will be required to be submitted. Here it is important to go through the policy to understand what constitutes an ‘accident’. Even a case of snake bite is accepted as an accident. So the insurance amount becomes payable.

Life insurance claims will require the original policy documents and the death certificate. The insurance company is to be notified and the claim forms completed and submitted along with the documents at the nearest office. In case of accident rider, additional documents like police FIR, panchnama, certified copy of post mortem report etc. will need to be submitted.

Investments

Many investments can continue with the ownership being transferred in name of the joint holder or nominee. There is a well-defined process for this, in case of demat accounts, stocks and mutual funds. In certain cases, the funds will have to be withdrawn like in case of PPF accounts. It is important to change the names as soon as possible because in case of payouts like dividend or maturity amounts, the cheque will be issued in the name of the owner of the asset.

Financial Issues in Death

Banking relationships

The name of the deceased will be deleted from the existing bank accounts/lockers. The account can continue in the name of the joint holders if available in most cases, though some banks have rules which state otherwise. In case of single accounts, the account will have to be closed and proceeds will be paid to the nominee.

It is beneficial to continue at least one account which has the name of the deceased till the name in all the investments has been changed. Hence any cheques or ECS credits coming to the account will get processed.

Collecting the proceeds

As and when the monies are released to the nominees, it would be ideal to park the funds in a liquid fund till a plan of investment and usage emerges, based on the situation of the family. It is pertinent to note that the nominees receive the funds to be passed on to the legal heirs. The payment to the nominee absolves the paying organization from its responsibilities.

In case there is a will which is contradicting the nominations, the legal heirs named in the will can get a stay on the use of funds by the nominees. In case the nominee and the legal heirs are the same, then there is no problem. The problems can arise only if there is some dispute by any of the family members who think they should be receiving some or all of the estate of the deceased. But that is an entirely different matter.

In case there is no nomination in any of the investments, the investment company or the insurer will ask for either a probated copy of the will or a succession certificate. That will establish the right of the claimant over the monies to be dispensed. This requires hiring a lawyer and usually takes a long time.

Planning for the future

Parallel to these processes, one will need to work on establishing the needs of the family in the new circumstances. A financial planner will be best able to guide a family about this part of the process.

The primary question will be how much funds will be required to run the house? Is it available from existing sources of income or will the family have to rely on insurance money? Other questions that need to be answered are whether the death will affect the financial goals of the family in a major way.

Once the basic information about goals, income and expenses is collated it will be possible to get an answer for the above questions. Based on the situation then a plan for investment will have to be devised which can provide some regular income at the same time supporting other long term goals like children’s education ,marriage etc. If there are any liabilities of the deceased that need to be repaid, it will have to be done from the receipts from various insurances and investments. Ownership of properties will have to be changed in the name of new owners.

A risk analysis for the surviving members of the family needs to be done. In all probability the insurance requirements of the surviving spouse will go up if he/she is now the sole earning member, unless resources are enough to meet current and future financial responsibilities.

All nominations will be needed to be updated in view of the changed circumstances. One would also have to look at places where the deceased was an appointee in case of nomination of minors. In those cases a new appointee will have to be registered to ensure smooth passage of funds to the nominee if need arises.

Many small things if taken care of in one’s lifetime can make life easier for the family in case of an eventuality. That though is a topic for another time.