EP38: Money, after you dieEP38: Money, after you die

[podcast]

 

How do you plan for a smooth transfer of your wealth after you die? And how do you help someone whose loved one has passed on? In this episode, Shray and Deepak explore what you must do in an unfortunate circumstance of a loved one's death, and for an easy transition in case of your own. We also invite Harshavardhan Ganesan, a practicing lawyer, to give us the legal perspective. Listen in for real life anecdotes from covid, succession certificates, legal wills, and some counter-intuitive learnings.

Summary

• Documenting everything you own and owe (bank accounts, demat accounts, mutual fund folios, insurance policies, loans) is the first and perhaps most useful step - it will save your beneficiaries weeks and months of figuring this out for themselves. You might find some surprises yourself.
• NSDL or CDSL eCAS, CAMS consolidated statements, CIBIL reports can help you put this list together. It can also reveal stuff (like a credit card opened 10 years ago) you had forgotten about and might need to address.
• India doesn’t (yet) have a single place with all your financial assets recorded - the account aggregator should accomplish this but it’s still a while away from getting there.
• It is really helpful if someone knows your phone and email passwords - it can be different people or they could know how to reset the password so that they can get your account statements and the like.
• Your nominee will play a role in transitioning the accounts from you to your designated beneficiaries. So if the nominee you had originally mentioned was your parents but they’re now no more or perhaps too old to bother with all this then update all nominees to someone who is likely to outlive you.
• If your household emergency fund is in a single bank account in only your name - your household is effectively locked out of this money from the time you pass away till it’s transferred to them (which could be weeks or months).
• Mutual funds currently need to be transferred fund house by fund house, but demat accounts (even ones containing several mutual funds) can be transitioned in one go
• The richer and more complicated your finances get (foreign assets) - you may have requirements to register a will in the foreign country or be mindful of inheritance taxes in the relevant country.
• Land is often a pain with documentation, encroachment etc. Unless you’re a real estate tycoon with a team or your beneficiaries are the kind of people who love dealing with paperwork and negotiations, consider simplifying your land holdings.
• Loans don’t just transfer to the beneficiary. Consult a lawyer before repaying loans and resist the temptation to just clear them out for the headache.
• You may be gifted with money and financially savvy - but your next of kin might not be, tell them about index funds and gilts to prevent them from being ripped off by relationship managers and salespersons.

---

Full Transcript

Shray:

Hi Everyone and Welcome to episode 38 of the Capitalmind Podcast.

In today's episode, we would like to talk about dealing with and, for that matter, preparing for money matters when the absolute worst-case situation arises, and when someone and maybe that person could be you, dies or passes away and everyone around them is now left to deal with the financial fallout and figuring out how that process works.

It's quite tragic to think about it, but as the year has unfolded, initially we started with investing through a crash about maybe one year ago. Then we worked with - How do you deal with these astonishingly highly valued and richly valued markets? And then that kept going up. But now as more and more of us are losing loved ones or friends and family close to us, people have increasingly been reaching out to Capitalmind on this somber note, where they're like ‘someone is no more, and can you guys help or what advice you have to share?’

So, we decided that this would be a great place to just do a podcast and sort of capture all this knowledge and share it out there to see how this process works. So Deepak, welcome to the show and you've been in this position quite a bit recently, unfortunately right, and so that's why we really wanted you to come in and help us out.

Deepak:

Thanks, Shray. It's actually one of those things that you don't ever want to talk about, but it's got to be talked about at some point.

This is unfortunate. A lot of us now, at least in the second wave, know a family or two or three that have been impacted, perhaps quite deeply by the crisis, and it's important not just to be able to help them, but to also help our own families by fixing our financial lives. Perhaps so that the grieving is emotional but does not have to be a financial burden as well.

Shray:

Perfect, well, I think that's the right sentiment for today's episode. And so, let's start. Deepak, I'll set the context. Let's not beat around the bush here because everyone knows how awful this situation could be. So let's speak as clearly as we can and get to it. You've been in this situation. So, you get the call. Someone close to you again, friend or family has passed away. They've died and now you have to help deal with the money situation.

I know we've got calls like this so Deepak; how do you start? Or perhaps I should rephrase it? How did you tackle this in the situations that you were in and what advice or generalizable rules or process flow do you have to share with the people listening?

Deepak:

Yeah, so I mean, I think the problem really is in a lot of cases we've seen that people don't know, the next of kin doesn't know. And I think this is one of those things that makes you learn about this after, is that people don't generally reveal details of their finances to their own loved ones. For the most part, their spouses or their family does not have any awareness of where their money has been placed. Earlier, you know, used to have your money in your house, perhaps as gold or something like that, but now your savings are in bank accounts and insurance policies and in mutual funds. And I don't know what else, real estate as well. So, if you don't have a record of where all of this is, it's going to take your family quite a bit of time to figure out where and what is where in the first place.

So, one of the problems that we have in India is that there isn't a single record for everything, so you have to kind of try and figure out, first, where the assets are in different kinds of financial savings instruments. So, I wouldn't go to real estate because real estate, I hope that everyone will be aware of where the real estate is. 

I will come to that later, but also to look at where everything is, there's a bunch of bank accounts, you know, there's a bunch of perhaps loans, credit cards, mutual funds, insurance policy. These are the main things that you want to invest in. Almost all of them nowadays require a PAN. So, and all of them are linked to your email ID and your phone number, so one of the things that you have in terms of planning is to 1st find out where all the assets are now. This is important because you can't just go piecemeal on this because of certain requirements that India has in terms of succession. It's a little complex over here, so let me start in a way that says first establish what the person owns and in case you do not know, we've seen cases where they don't know which bank they had an account in. We went into the person’s phone, the person's phone was accessible, luckily.

Shray:

But did you have the password, or you had to just take out the SIM?

Deepak:

So, unfortunately, in one case the phone was locked. It was an iPhone. It was locked with that code, and if you don't enter the right code, it locks you in for half an hour and then one hour and then three hours and all that stuff. So, you couldn't get things out, so they had to take the SIM card out and put in a different phone. In this second case they had access to the phone, so it was relatively easy there, but the email ID in both cases was accessible. That's one thing that we'd like to advise is, have someone else know at least one of these passwords. Different people, perhaps, or the same person. Your spouse, for instance, may know your access code to your phone and the password to your email address. Once you have that, just looking at these two places will give you enough detail if you don't know anything. 

For instance, banks keep sending SMSs to the phone saying your balance is so much. There is SMS that comes about credit card usage, loan usage, there are apps now. So, for instance, if we didn't know anything about where anything is, in terms of bank accounts, one of the ways you can do this is, install a UPI app on the phone, any UPI app, Paytm or Phone pay or whichever it is. There are some known banks where people usually have accounts with. You can actually go to the UPI app on the same phone that the person’s regular phone is. And say that I have an account with HDFC, the UPI will actually go and check if the person has an account or the phone number is linked with any account with HDFC Bank and it will come back and say, “well we have an account, here is the last four digits.” So this is the one way you can discover, this is where a person has a bank account.

For mutual funds and for stocks, you can actually go to NSDL or CDSL.These are depositories and for the depositories, you can actually make a request for something called a CAS - consolidated account statement.

It's an electronic email statement, emailed to the address that you registered with, where you get a list of every single thing that the person owns, including mutual funds and stocks and various Demat accounts. You may have a PMS account. PMS usually creates a Demat account for you. All of this is in one place in the NSDL. This may also soon hopefully contain details of your deposits of your insurance company policies as well, so that might be another way to do it. Otherwise, insurance company policy is a little more difficult to find. Things you may not easily find are PPF, PF or National Savings certificates, because these are bearer instruments, there will be a record somewhere, but it is much more difficult to find these, so you will have to use different methods to find this. But hopefully all of this will have some kind of a back SMS to your phone telling you that there's such an account open.

The problem on top of this is, once you've discovered all the assets, you have got to find out if any of these things have nominees on them. So real estate. OK, let's keep that separate because that's something else. All bank accounts have nominees. Get to find out who the nominee is on each account, and they need to be involved because they need to come in and say, well we can take them and remember nominations are like this. I can set up a nominee on a bank account, but that bank account nominee does not mean that, that nominee is the person who's supposed to receive the money. The bank says “well, I will give it to the nominee and then it's the nominee’s responsibility now to take it and give it to the legal heir of the person who has died. So, for instance, if the nominee of a bank account is a person’s mother because it was set up when he was not married, but now he is married and he has children. His mother is not going to be the only legal heir of his estate, it’s going to be everybody else put together, so it will be the responsibility of his mother or his parents to ensure that the money is spread across all of the legal heirs of the person. Once you get all the nominees, then you can at least have the assets transferred. So, the people will not ask you details saying oh just a death certificate is enough, and we'll move it. 

Shray:

But the assets will get transferred to the nominee in this case, or at least the ball will now be in the nominee's court to then comply with the terms of the inheritance. So, the nominee does matter then because if you have a nominee, as you've just pointed out, that example. When you made your first bank account at whatever 18 or 21, the only person you had around were your parents and so you made them the nominee and now what if they are not around anymore, or they're fairly old and they don't really have the energy or in this case the preference to go to a bank and actually do stuff. I think it is important to take stock of your nominees and list them carefully and ideally have nominees who will outlive you, if you can predict that. 

Deepak:

That's the thing actually. A nominee should technically outlive you. If a nominee is absent or not available, or you know has passed on, then you fall into the same bracket as not having a nominee at all, in which case all these guys will do different things. So, most of them will say there's something like a chain of command here, so the fewer assets you have, the more likely they'll get away with something that is less legally reliable. So, let us say you have mutual funds less than two lac rupees. You have to go to each mutual fund. And by the way, you have to actually go to each mutual fund if you have a nominee and that each mutual fund will transfer the shares or the mutual fund units to that nominee. If you have 40 mutual fund companies, each mutual fund has to be approached separately. But if you have one Demat account, you have to just support the Demat account and the  Demat account can contain 50 stocks. The Demat account also can contain mutual funds.

Shray:

Correct, yeah, like Coin at Zerodha  does that very well right? Yeah.

Deepak:

So, they put it into and in fact in the PMS we run at Capitalmind, all the mutual fund units sit inside a Demat account. So therefore, if you just transfer the Demat account to the nominee, everything inside it, whether it is 100 companies or one company or 10 companies automatically gets transferred. There is no need to contact the individual companies underneath. So, the transfer is done. 

So it's also imperative that the nominees are updated so you know that this is the person you want to be handling your finances. If you have a spouse, you're going to give it to your spouse, if you have children that you want to nominate instead, you'll use the nominations. Also, remember, in many cases people, and this is a smart thing to do, but many people may not have done it, people have joint accounts. So in joint bank accounts for instance, the other person does not need to do anything. If one person passes on, you just give a statement saying this person is no long around, but that account can continue to be operated, whereas if a person has died and he's the sole holder of that account, you can't operate that account and this is very important, because if you operate that account, if you say listen, ‘I know the password and the OTP. Let me just take the money out.’

If I did that, eventually I'll go to the bank and show them a death certificate. Then they'll say, “this death certificate says the person died on the 2nd of the month, but on the 5th of the month I see a transaction that's taken money out. How has a person transacted if he is no longer alive? And therefore, you must have done it”. And you cannot even now prove you have authority, because how can you take the authority of a person who has died?  So, you will fall into legal hassles, according to me. This may be something that you might want to take a risk with, something like ₹1000 or ₹2000. Eventually you should not do this.

Shray:

Especially if your other account is also at the same bank, right? Because then you don't need to keep them happy in that sense.

Deepak:

Yeah, I mean, it’s equivalent case right now is for instance, people are getting calls from their bank saying don't transfer money to a cryptocurrency. And you might say, ‘what's the big deal if you close down this account, I'm fine.’ But then you have a credit card with the bank, you have something else with the bank. The bank will shut down all the relationships, so if they feel that you are doing something illegal, your entire relationship with that bank could be at risk. And this is tricky because your problem now is, let's say there's no nominee or the nominee has passed away.

The chain of command says, first get a legal heirship certificate which is available, (I think. I'm not sure from where) but is basically a registrar who gives it to you where you just have to state that you are the only legal heirs. Now, typically if you have a small balance with a bank or a financial institution, they will accept this. It's more than two lakh rupees. They will ask for a succession certificate. A succession certificate is more complex. It's a statement by a court that says these are the only legal heirs of this person.

A succession certificate will only happen in the absence of a will and the will is the highest legal authority. So, a problem that you know people will face is... and when you're doing succession certificate, you really have to prove, and sometimes you'll have to even put an advertisement in a paper saying that we are the only legal heirs of this person and if someone comes and contests it for whatever reason, sometimes maliciously also, then you have to prove that that other person is not legal heir. And you know this process can take a little bit of time.

So, a succession certificate is more difficult to get. You have to pay fees on it as well. These fees also vary by state. And the last one is if the person who has died has left a will, this Will has to be probated. There are probate fees also that apply, typically a small percentage 0.5% of the total assets with an upper limit. So, the upper limit maybe something like ₹10,000 or 50,000 or ₹75,000 in some states.

In some cases, like in Delhi, you don't even need to probate the Will. The Will itself is enough. So, probate of a Will is simply that we go to court and say this is the legal Will. And according to the Will the assets must be segregated like this like this like this. These are the assets to which this will apply in the probate of the will, they will say that ‘this person has had these assets and these assets need to be split in this particular manner, as specified in the Will.’ And that probate of the Will, you can then take it to all of the financial institutions and say ‘this is why you need to transfer it to us’ and that is how all the financial institutions will obey.

So, whether it's a Demat account or a bank account or mutual fund? They will all obey it, but you will have to contact them individually for each of them with a copy of the probate of the Will.

Shray:

So, I'll just pause you here. I mean, so far what you've covered is look the biggest help that you've brought to the situation so far is making a complete list of assets which sometimes is not trivial and especially with things like insurance policy or those savings certificates and stuff you pointed out. I mean, you may have some physical hunting to do as well, so that's one level of the process.

Maybe account aggregator when it becomes operational will finally make this easier. But I I believe it will take some time, right? I mean it's been around and it's slowly inching its way there, so that's the first. Then the nominee. And that was a slightly unexpected, if I may call it, point because the nominee plays a very important role and you may not have either selected the nominee with much thought or the nominee may no longer be the best person to be helping out with this situation, so that's the other thing.

There's that point around of course you can use the ‘hack’ on your phone, that UPI team to figure out where the bank accounts are. But then mutual funds are a surprising pain in this regard as you pointed out. You have to go to each different fund house. Demat accounts are easier including when the mutual funds are within the Demat account. How would PMSes AIFs stuff like that? I mean how do they function? And of course, your last point is the Will make life easier for everyone in this regard, because then you won't have to fight. We are bringing one of our Captainmind premium customers a lawyer Harsha, after you onto the call. He has a slightly different take on this, based on some level of assets or which religion you belong to, but I guess we will park that till then.

So just continue with where you were. Fine - you have a Will which can make life easier. Although you do have a process to follow in that case, I just wanted to sort of direct your attention towards - how do you deal with things like PMSes, AIFs, PPFs, your Credit cards help out in any case? They keep claiming that they'll give you insurance and all that stuff.

So just wanted your thoughts on that?

Deepak:

Yeah, so OK, let's take this one by one. There are many others as well. There's gold, there's ESOPs so let me start with perhaps the first layer which we talked about, which is the PMS and AIFs.

Now typically the PMS will create a new Demat account in your name. That Demat account can be nominated and would have been nominated at the time they were created. So, you can go to the PMS company and say ‘this is what's happened, please transfer’ and they will transfer the ownership, or they will give back the money to the nominee. Similarly, as an AIF you will actually hold units of the AIF, the units can be nominated at the time of creation. If there's a nominee, the AIF will require the nominees’ Aadhaar card or pan card or something like that and then transfer to the nominee. So again, there's no problem on that front. It's relatively simple, and it's also good because PMS may actually hold mutual funds and stocks and other things in your name, all of which then come into one umbrella, and then you need to do the process only once, with the PMS and everything gets sorted from there.

A similar deal will happen with, you know, a few of the other instruments. So, for instance, ESOPs. A person who has died, may have ESOPs with the company he is with. Anything that is vested but not exercised will still be transferable to the legal heirs. The legal heirs may just be able to say ‘listen, whatever the transaction charges are for actually exercising them, please tell us we will pay those, but give us the proceeds of the shares.’ If it's an unlisted company, they can even transfer the shares to themselves, if the policy of the company is to do so.

Many companies will have ESOP policies that say the employee’s heirs will inherit the ESOPs. Some others may say ‘no, they don't inherit the ESOPS, but I will give them cash in lieu of those ESOPs.’ So, however it is, a company ESOP mandate has to be, you know, figured out and many of them may not remember it. And the companies often are too busy to remind people that this is what they have, but I think that is one key aspect as well.

If you die, there's life insurance with the EPFO. So, if you have an EPFO, you've been paying it regularly and you die, based on your last salary up to 7 Lac rupees of insurance is available to the family, which you leave behind. This is only for the employment of a company that's paying PF. But this is little known but an important thing is that the life insurance is actually available for people who have died of COVID. They're actually paying out these claims from one lac to 7 Lac rupees.

You may actually have insurance on your credit card as well. Mostly they are usually for accidental deaths. If people die in an accident, the credit card company would have taken a policy, in which case they will pay the family or the next of kin a certain amount of money. You just have to call up the credit card company and ask if such policy exists.

So that is roughly what it is for most of these financial assets. There are physical assets, of course...

Shray:

Before you move to physical assets, I remember you were sharing one example where a person had foreign shares because he worked for, there's no harm naming names right, you work for say the Googles and Microsofts of the world. They pay you in stock which is of course gone up 10X since God knows when and you hold these in either E trade or a Morgan Stanley in the US. Now normal US estate laws for US citizens are same like  5 Million USD and above then you worry about inheritance tax, right? But that wasn't the case for these people. If I remember correctly.

Deepak:

Yes, in fact the US actually taxes non-US residents with a fairly large tax bill. I am talking about non-US residents plus non-U.S. citizens. If they pass on, then the limit at which inheritance tax applies is $60,000 which is about 50 Lac rupees. So, if they own stock that's more than that in ESOPs or in these foreign brokerages, they will have to pay 40% estate tax inheritance tax to the US before the remaining shares are transferred back to you. Which actually means you should have somehow sold them before you die. But of course, not many people know exactly when they're going to die, so nobody's going to sell all of this stuff in advance.

Shray:

But Deepak, then I just realized this also holds true of, say, the Interactive Brokers or Vested and all those other startups which help you because you're still owning this foreign security. Unless you're going to take the call that ‘look, how will they ever know? I'll just close the account pretending to be the person,’ but I mean again, we are just gambling here. I mean, and hope the amount is small enough that they don't find out later.

Deepak:

Yeah, and plus information getting shared all the time. So, if tomorrow the sharing of PAN numbers comes with sharing of death certificates, then you have a bigger problem that you now fall afoul of that law, but also remember that they may be equivalent.

So, for instance, if I'm buying the NASDAQ in India, I won't send my money abroad, and buy the NASDAQ ETF in the US. I have NASDAQ 100 mutual fund in India, which I will buy because it avoids me paying this 40% tax in case you know I die. Or there's an S&P 500 mutual fund in India, so even the US they say the same thing,’ if you buy a foreign fund then we will tax you differently than if you buy an Indian fund that invests in the same thing that that foreign Fund does.’

So, India, I mean, I would say because the US has such strange tax laws, you should be aware that the Indian laws of inheritance and all that may not apply naturally to such organizations. But it's also important to know that this is complexity because you're investing abroad, you have stuff like that. You should make sure if you're extremely well-off, then perhaps use a different vehicle like you might create a family trust and then use that trust to invest abroad.

In India, you can create an HUF and we'll come to that in the second part of this. But if the person has a HUF and the property or the assets are in the name of the HUF, it's very easy to transition because the HUF survives a person. That means if an HUF exists today and that person is no longer there, there is a continuity. The HUF can continue. It has to eventually be disbanded if there is no Karta, but the Karta can be transferred, I think since the HUF will actually survive a person’s death and it has to be formally dissolved. Only then does it kind of go out of existence.

Shray:

Thank you, but I think your point here is well made. I think two of our more affluent advisory customers were advised when they had finally managed to build up substantial assets in Singapore. In this case, Singapore is not very thrilled with your Indian Will. So, they were saying, ‘you have now enough money. Now take the damn flight, come here and create a Singapore will so that you don't have issues. So I mean, greater wealth comes with this complexity and so on.

I had interrupted you when you were moving on to physical assets, which I think include your horror stories of the last 20 years dealing with land, and I guess there's gold and I'm not sure if anything else. So yeah?

Deepak:

So no, but land is so complex because people may say they have land. But this is a piece of paper that tells you something like - in the North it is bounded by Kapoor's property and on the left it is by Chennaya's property, and then you're like, ‘OK!’ you go and ask them. They're like, oh, I mean, you don't even know who this Kapoor is and who this Chennaya is. And you kind of have to go there and try to make guesses about where this is. You don't even have a Geo location. You have a map, so even if you find the document you don't, you aren't really sure where your property is. Then finding a land in the assets and whether it is hypothecated, and we haven't come to loans yet because loans also have a complexity.

So, for instance, if there is a property that you bought and that properties are on loan, then the registration document of that property will actually have the name of the bank or the financial institution to which the home is mortgage to. You have to go to that institution, pay back the loan, only then do you get the permission to transfer it back to your name, if you are a legal heir.

This is also important because you may not have enough money to pay up for the loan. Then what do you do? So many of these institutions when they give loans against property, they will actually take a life insurance in the name of the individual and assign it to themselves. So, if you take a loan from HDFC, HDFC will take a life insurance in your name which is assigned to HDFC itself. So, when you give them the death certificate, they will give it to the insurance company, take the claim money, take whatever is owed to them and give you the rest. So only then is the property de-hypothecated in a way. And if you think about it this way, this is a security that was known that was given against the loan. The bank has every right to sell it. Because it gets the money from life insurance, it won't sell it. It'll just give you back the excess money that they receive. But in many other cases where there is no insurance or the person’s family cannot pay back, the bank has a right to actually sell the property that is mortgaged to them.

Now this is complicated because what if there is a personal loan? Person has taken a personal loan from the company. Do you have to pay it back? The answers no. No, you are not the one who took the loan. You are a legal heir of the person who took the loan. There is no reason why you should pay it back.

The company the bank can demand it from the estate of the person has died. Which means before you inherit it, you may have to ensure that the estate can pay back that loan. But in general, otherwise, if there is no estate, for instance, nothing’s there that the person is left behind, I mean, almost nothing. Then you know you are not liable for those loans, because you are not on that agreement. You can't suddenly inherit liability when someone passes away, regardless of whether you are the person’s son, or their spouse, you have no reason to pay that loan at all.

So, you can literally tell the bank to take a walk. If they try to come after you to say you know this is a personal loan that you have to pay...

Shray:

But Banks won't be that brazen about this, right? In fact, I think you need to be more worried about other people, more informal and less ethical lenders, like in fact one of your horror stories was that people hounding the person even when he was on his deathbed ...

Deepak:

Which is so sad.  because I mean a friend... and this is troubling to me even when I say it. They found in his WhatsApp that he had been hounded by these lenders with voice calls and messages when he was in the ICU and couldn't talk. He had an oxygen CPAP machine on his face. And he was sending them photos of himself saying I can't talk because I'm in this condition and they were still hounding him.

Shray:

They're like, no, no, we don't believe you. I mean whatever.

Deepak:

Yeah, I mean like you know so and now obviously they will hound the family as well. Which is where we were telling the family the same thing. There is no reason why you should repay what someone else has taken, regardless of what happens. Many people, I mean they feel obliged to do so, and I'm saying, you know, the world doesn't owe you a favor. Please be as legal as you have to be and in the spirit of legality, you know, say that this is not something I owe just because someone else took a loan. And I know that someone else is very close to me, but I'm not going to replace someone else’s loan.

I mean people who are lenders are a little ruthless. I had things where people have called me and said ‘Deepak dear friend, we found your name on his phone book. So, we're gonna ask you, he owes us some money from 30 years ago. Why don't you pay that loan?’ So, I'm like, ‘hey that person has left and gone abroad, and I haven't been in touch with him for 20 years myself. And, I am not going to pay the loans of anybody else. They could of course be pushy about it, but the point is they will try.

Shray:

So, in this case they're trying to embarrass you enough to contact your friend and sort of create some pressure, right? I mean, I guess that's what they tried to do.

Deepak:

Yeah. Then they called me. They would have said, ‘oh this person has won an award. I'll be like, ‘very good, very nice he is my friend.’  ‘I know he is, but he owes us so yeah...

Shray:

He also owes us so much money...

Deepak:

And I'll be like ‘I don't know where he is, or he's out of the country and I don't have any connections.’

‘Why don't you pay it back?’

So, I'm like ‘why should I pay it back, right?’ ‘Because you're his friend’ and then I'm like ‘that doesn't put an obligation on me.’

It's the same whether it's a person’s father, brother, sister, parents, kids. You don't have to pay back someone else’s loans. That is simply not done.

There are some loans which will survive. So, for instance, if a company takes alone and the owner of that company changes. That new owner is still going to have to pay back that loan, but not from his personal name from the company itself.

Shray:

Yeah correct, yeah.

Deepak:

It's not the same as personal loans, and I feel that you know when people get hounded, they get miserable, and they feel the first thing is to let's just pay it off. But I think verify the authenticity no matter how close that person is that tells you that they are owed money. So, say that ‘if you have proof, please bring it across’ and you know, using the proof you can decide whether this was given or not. And in some cases, you have to pay from the estate so you can pay from the estate of a person who's passed on.

But in most cases, if people just come and tell you that ‘you know this person owes me I don't have any proof,’ you don't have to pay back all these things. These are soft things that you learn only after you do it wrong once.

But people will try the strangest things. We've had people try to steal shares away because there are physical shares at the time by forging signatures, people who've tried to hold on to assets for like 10 or 15 years, sometimes after a person has died, not revealing that the signature on those documents was actually the person who has died, but they say it's there’s and so on own. So, it's over 10-15 years you find out and then there's another five-year battle for possession.

But one thing I would say is assets survive a long time, which means if you have a bank account you don't know about, even if it's eight years, nine years, 10 years past, that money is still yours. There is no forfeiting of that money.

So, you can go to the RBI or the bank and demand that money back with the right kind of proof, no matter when you find it. So, if you don't find it in the first one or two months, don't say that it's gone forever. It's still something that's available to you as recourse that you can use it at any point in your life.

I have shares that you know my father left, which haven't yet been transferred because we couldn't find those companies at the time. And in this recent bull market, some of them have emerged back. So I'm using this time now 20 odd years later to tell them to transfer those shares, you know, to the legal heirs of my father. And we have physical certificates, so there's nothing like it's too late.

Shray:

That's very helpful. I think Deepak, we have almost covered everything that you care about, right? I think the only thing we haven't talked about is gold, but there's not too much to talk about there because I think as you said, look if it's in a locker, then you have to follow a process on getting the locker assigned to you. And if it's actual physical gold, well if the person who just passed away, if that person’s net worth is higher than a certain level, then maybe it has been declared to income tax otherwise I mean, it stays on the same perhaps, family locker or whatever in the house. Income tax won't care unless you're extremely wealthy to begin with. I guess that just about sums it up.

I think what your point is - Resist as painful as the situation maybe, document everything, approach it methodically, don't just settle something to be done with the hassle of it, take stock and then figure it out. And when it comes to things like loans, be very mindful of what is actually payable and what is not, and it may be helpful to bring a lawyer in, depending of course on who the lender is or someone else in depending on who the lender is as the case may be.

If you're fine with this Deepak, I'd now like to sort of shift gears unless there was anything else you wanted to mention, which is, this is how you helped out people who come to you for help, have come to Capitalmind for help. But now with these lessons, as you know, COVID has taught us that not everyone will live forever and sometimes you could be doing 100 pushups a day, switch to a completely keto or vegetarian or whatever it is diet these days, but the virus doesn't necessarily discriminate, and you could be next. So how do we, as say the people who are handling finances, prepare for this situation and sort of make sure that the people around us, dependents or loved ones and all, the only grief they have to experience, is that of the demise and not the financial challenges.

And one thing which I think you've pointed this out is in this case, most of our customers end up being men for whatever reason, but whoever, whether it's a guy or a girl, if these people end up being the financially savvy one in the family, everyone else delegates everything to them. It's like OK, now you are the financial person you have to deal with all this stuff, so it's not just that this person has died with all the knowledge, but this person is also died with all the expertise and so now everyone else, even if they're left with this money, they don't exactly know what to do with it.

So just maybe, if you could talk through both of these, how do you make sure that your next of kin is in a good position to deal with this, both in terms of inheritance and then also in terms of what to do with it thereafter?

Deepak:

So, I think you see, we muddle our financial lives all the time. We'll invest in a startup once in a while, we'll do this, we'll do that, we'll buy, give some soft loans etc. What I would say in general is the way I would have told someone to take stock after a person has died. I would say before a person dies and when they're healthy and not even thinking of dying, once in 1/4 at least take that stock again on yourself, which means list out all the bank account, list out all the Demat statements, account numbers, nominees...ensure that these checklists in place. Every account should have a nominee, every nominee should be aware that they are the nominee for this account. Every asset is listed so that you can say, OK, I have this kind of real estate, I have these kinds of mutual funds, so you have some kind of a statement that kind of attaches to all of this and this has to be communicated to one other person.

So, it's a spouse. Your spouse should know this is the asset list that both of us have together. And if this list is followed to the T, I mean, if something happens to one person, this list contains the details of everything that has to be transitioned.

And you update it every three every six months saying I have so many credit cards. I have so much you know so much in terms of a loan or home loan or personal loan and all that. The idea being, that the next person can actually then take this and find out this is what the situation is. And so, for instance I have some LIC policies. I have taken them 20-25 years ago and they're close to maturity now.

So, you might say, ok close to maturity, big deal? But you know the point is if something happens to me today, also, those policies are valid, so someone needs to take those policies and you know, apply for them in a way. So, I think just listing this out is the first part of the game saying this is exactly what I own now.

Second part is how do you want to do with it? You can actually take a Will and say this is how I want to build this property to the next person. A simple Will suffice in the sense this is my last and final. I mean you'll talk to Harsha. He's a better judge of what needs to be done. But there's some language it has to be your last Will even your first Will has to be your last Will.

Second, you have to say you are of sound mind though I have no idea why a person of unsound mind would say he's not of sound mind. But you know the idea is to say that yes, I am of sound mind and then you have witnesses, and those witnesses should somehow outlive you.

Shray:

And shouldn't be like huge beneficiaries in the will either, I guess because otherwise...

Deepak:

Yeah, I mean then it creates a problem, because if they don't like what's in the will, can they just say that this person wrote it when he was of unsound mind you know, or something like that. Also of course if there are huge beneficiaries of the will, they’ll know what's in it. And they might not like it if you want to change it, or if you change something in the data point and so on.

So, you can list out the assets there and you can say anything listed here has to be divided this way, anything more than this has to be divided in this way. Remember only that because of personal laws in India, you may not be able to Will away anything you own everything you want. What you inherit from your parents if you haven't sold it in your lifetime, you cannot Will it away to anyone else. It has to go to your heirs according to the religious law that you belong to.

Which means if you're in Hindu personal law, it has to be all your children, men and women and girl, you know male and female. So, and your wife and I mean there's some strange laws in India which says ‘a person's daughter in law does not inherit in certain cases, so it's some weird. There's some weird...

Shray:

You said there was that Parsi law that if there's a daughter who marries outside of the community, then she may not be able to receive this and so on, yeah?

Deepak:

Yeah, a person whose mother is Parsi but has married a non-Parsi, those children are not considered Parsis. So therefore, the girl's father passes away, they may not be allowed to inherit in ancestral property from that line.

So there is a lot of nuances in this law, and that's why you know when they tlk about this common Civil Code, they'll largely talk about building a common inheritance law, but the framework of inheritance is almost always written in religion in some kind of a strict way. So just to bring justice here, you might want something more common.

But sometimes justice and law and Religion are three different things ...

Shray:

But you can sell things, right? I mean,of course you may have to face the ire of everyone around you, but if you sell the property then with the cash you can do whatever the hell you want with it precisely.

Deepak:

So once you sell the property and sometimes you know the complex thing is this. We know situations where someone is living in a property that they've inherited. The problem now is not that they can't sell it. I mean they can sell it whenever they want. Unfortunately, they don't own it to sell it, so the inherited properties come to them from their father, their father has received it from his father, so there is another lineages. That means if father had a brother and brother have children and all that they live outside the country, They have to actually come, because they are also parts of the inheritance process they are also Co owners in this property, they have to come down to the registrar and sell the property.  They're saying ‘listen, we're not going to come and so this person can't sell it for whatever reason.’

So, if you can of course sell inherited property, take the cash and build another property that is still called your own. But if you're able to sell it, you can. In some cases when you can't sell it, then you can't pull it away either. So, I know that there are many situations where people have ancestral homes in villages, but they can't give them away. Because the chain of ownership has not even been established. Forget the chain of ownership because they don't even know who all are there.

So, if for instance, my niece turns 18, she automatically becomes a person who is part of the inheritance of whatever my father had, or his father had, and so on. So then anyone else who requires to sell the asset has to take permission of anyone who's above 18.

So, inheritance is a very complex subject, so you have to remember to write the Will that you're only willing away assets because otherwise the Will can be considered faulty if you try to do things. So, you don't want that right, you don't want somebody to say, 'listen this entire Will needs to be cancelled, because this is attempting to do something that's not legal.’

However, courts are smart. So, they might only strike away the illegal parts off a will, but the legal parts...

Shray:

So, taking stock, I mean, as you said, the first biggest thing you can do is keep a very well updated list of all your assets with their nominees. Since we learned in your first part the nominee's matter. Fix that nominee if it's no longer someone you want to have as the nominee. Mention your loans and this itself will be half the problem. Have a will that's also going to be quite helpful especially if you've made a clean enough will. And the 3rd is I guess coming back to your first part is to figure out a way that there are people who can come forward when the situation arises. Who know how to access your email and phone, or it may not be the same person, but I guess it can be, so that when people have to then sort of make these things work again and get OTP and log in and check balances and so on, that information is available.

I guess again this is a financial podcast, but while we're talking about it, you might as well help someone shut down your social media accounts so that you give people access to those various passwords. although I believe things like Facebook are already making that easier because you can sort of delegate authority to someone who then shares that information. So, there's that.

I guess. stare at your eCAS  and CIBIL reports yourself so that everything there does make sense and there's not some secret credit card from 10 years ago where you cancelled it but you didn't realize there was a fee due. So, I guess other than that, yeah, if you can share logins and passwords, that would also be a...

Deepak:

Yeah, there's one other thing. I mean you will actually get Cibil report free once a year and you should use this facility so you can get a credit report once a year. That Credit report will actually contain all the details that you have and all the loans that you've taken, the credit cards you own, the people that have reported you as a borrower. It's important to see that because sometimes they will report you as a borrower when you've not been a borrower. We've seen a case.

Somebody has been called 20 years later, saying you took a credit card from us. You haven't paid it back, so you have to pay us ₹50,000 now. So then of course you have to negotiate and make sure this person takes you off the Cibil record.

But it's better you do it when you're alive, because if you're not there then how does that other person prove after you that you didn't take this loan in the 1st place, so you didn't take this credit card in the first place? It's impossible. So that is just a burden that you're going to leave behind. So you might as well fix it before you go ahead.

And then, of course, you may own a bunch of other assets. Listing them out is important as well.

Shray:

Well, got it. This makes sense and I think just as you pointed out, does this, in a sense, give people reason that they should simplify their financial lives. So, is that really not the take over here? It's not as much as simplifying because I know one person in this podcast has ten bank accounts in their name, so clearly simplifying isn't necessarily the modus operandi, but perhaps more so I think...

Just do think that you may not always be around. So, if there's an emergency fund, as you pointed out then everyone should have legal access to this if needed. So, it should be a joint account where two people can use it. That's fairly clear, and so on. I mean, I think that's what comes to mind.

Deepak:

Yeah, exactly this joint account concept is a very interesting thing, so you will have individual accounts. Salary account will always be individual because you can't use joint account for it. But what I would say is if you're married, work with your spouse to create a joint account where your spouse is the first name and you're the second name and you create also an account in which you're the first name and spouse is the second name.

The idea being this. Let's say you're the financially savvy person in the family, which is probably why you're listening to this podcast in the 1st place. You're looking at this and saying ‘listen, something happens to me, the next person or next of kin has to have control of enough money so that they can at least sit through this transition period.’ Because you know you have to run the household during the transition period. If that person does not have access to money, the basic money...

Because then you know you have to go to court order. Pay court fees just to get access to the rest of the money and you don't have enough money to pay the court fees. You are in further trouble and so on. But more importantly, you create these joint accounts. You will have to visit a bank for this because they don't allow you to create joint accounts online.

You have to put money inside of this account from your primary. You may be getting salary in one account. You transfer it. I do this on a monthly basis. I always ensure that the joint account is where most of the money sits. It's not the primary accounts where we are in. It also pays to be suboptimal. Do not worry about, this being the most optimized, the best form of investment and so on.

Because optimization is a problem when you are dying right? Because at the time of death you need the money accessible at that time.

I mean it's like let's say somebody is critically ill, you know, take the person to the hospital and you want to pay. You need a credit card. If the credit card is in your name only then what happens? You may need a credit card in the name of your spouse so that they can also use at any time, or your spouse can use your credit card because she knows the pin, or he knows the pin. And more importantly, I think it's also the responsibility of any person who has dependents to ensure that these checks and balances are set up because let's say something happens to both you and your spouse. How is the transition going to happen to the children?

So that is also something that you want to think of. That's a second level that says, OK, it's not just one level. I'm going to think of two levels, so this is my spouse and there's a third person who's also going to get knowledge of this process.

India does not have a deep enough trust structure, so hopefully there will be startups or good trustworthy companies that come in that say we'll handle life cycles after a person passes on, which means we will take care of all these transition pieces.

And we've heard of this in COVID where a father and a mother of fairly young children have died and unfortunately everybody is, at this point, clueless. And it's not like it's anybody's fault, right? You didn't make any mistake. You did the 100 push-ups. You went for a run in the morning, and you're healthy. You ate stuff. You avoided the ghee, or you avoided the parotta, depending on where you are, or your allegiances lie. But I think this is one thing that tells you that you know sometimes bad news can come knocking, even if everything you did was fine, so it isn't going to be your fault that something happened to you. It's going to still need you to create those buffers just in case something like this happens. And it's happening right in front of our eyes, so you might as well set up those processes now so that if it were to happen again and who knows tomorrow some other bat will cause some other spike protein to come across and we'll end up with another such situation. I hope it never happens to us, but you know, hope is not a strategy, right?

So, strategy is a strategy, so you might as well do it the way thinking of the worst because it's a few extra check boxes to check every quarter.

And we hope that the Indian financial system like account aggregator system or perhaps more. I mean you have PAN numbers. So eventually you should be able to just look at a PAN number and use a death certificate to say, ‘listen, I need to know everything about this person’ with the death certificate. And then that person can get access to all the accounts that are linked to that PAN.

Unfortunately, right now it isn't possible, so we'll have to, you know, pretty much be Atmanirbhar, as the case may be. But hopefully... 

Shray:

It's not my favorite word of the year so far.

Deepak:

Not the favorite word of the year at all.

Shray:

Before we go political on this, I’d like to shift gears. I do actually want to maybe end on a slightly more cheerful note before we bring Harsha. Deepak, look as you pointed out, even if now you do everything right here and now, all the money and let's say it's more than enough money, all these well documented planning OTP access shared assets have now moved on to your spouse or your kids, as the case may be. But if you were the financially savvy one, then you now suddenly have someone who's not super financially savvy who has, let's throw some huge number out there, 5 or 10 crores just showing up in their bank account.

Now, what does that person do with this? Because as you know, if you thought getting hold of this money was hard, wait till figure out how to invest it because I mean the world will basically just come in and latch onto you and make you buy ULIPs till the cows come home. If the person’s only familiarity with assets or with money is a monthly salary flowing in and then spending from that, well, they would probably fall prey to some sort of immediate annuity or something even worse, yeah...

Deepak:

Yeah, in fact, the word immediate annuity was also invented to avoid this phenomenon. Where people would not get money, they would get an annuity. Which means instead of me giving you 1,00,00,000, I will give you 5 lacs a year for the rest of your life. So, you look at this and say, ‘well, that's a good deal’ because you know if you give me one crore, I wouldn't know anything to do with this. The number of people who would say this is almost entirely 0, but the financial system in its wisdom has decided that we are too stupid to manage our own money. But having said that, sometimes we are.

Shray:

Fair enough, no, I agree. There's a reason these products exist and are successful also, yes.

Deepak:

Yes, and what I would say is, let's get a little bit smarter on this. And see, the idea is to prevent overspending of that money in the initial years, because it will not leave enough in later years. But at the same time.

Shray:

But also Deepak, to say that if a person doesn't know what the stock market is, and so on, how do you then make this money grow? Because after returning about 3% after tax, that doesn't sound very higher than inflation. I mean adjusting for inflation either. So, it's value destructive that way.

Deepak:

So yes, actually I would say at any point in time that a person having a slightly longer time frame, is money that's not required in the next two or three years, should be OK if you put something like 20% of your assets into equity and the remaining 80% can be in fixed deposits, fixed income or debt mutual funds, or you know, different kinds of policies.

The idea being this, that equities will take some time and over a three-to-five-year cycle, they typically tend to give you positive returns. It could be extremely unlucky and a five-year period maybe negative, but beyond five years the number of instances of negative returns in absolute terms is relatively low. If you think about it and what I'm really saying is, you'll get some principal protection only after three or five years. Your principle remains unprotected till that time and in debt your principal remains protected for the most part, but you get a much lower return of interest. Equities can go much higher return.

So given this, I would say anybody should think about first securing themselves with an emergency fund. They have an emergency fund for themselves. This is when a person is dying, you don't know what to do with it. First you take that first ten months of expenses and put it into some kind of a fixed deposit. Take the remaining and say ‘listen, we've got some stuff that I need for the next three years that goes into another fixed deposit.’ Anything that's more than three years in nature, you're going to do a 20% equity and 80% debt kind of superstructure and leave it at that. The person who is planning for his own or who's planning about what happens to him, his family, when he dies, he has to account for the fact that the family will not be financial savvy to be 80% equity and 60% equity. So, you plan.

For instance, if I want to say how much insurance do I need? I won't calculate it using equity returns of the money invested after I pass away, I will use it as if ‘listen I can get equity returns, but my spouse and my children may not be able to, so they're going to put this mostly fixed deposits with only 20% in equity, so their blended returns maybe 6 or 7%. So, where I thought one crore was enough for me, it's going to be 1.5 crores that's enough for the family.’ So that means my insurance just shot up 50%. So, I'm going to keep my insurance at a much higher level and when they get that one and a half crore... currently insurance is tax free, currently inheritance is tax free.

Shray:

Yeah, current

Deepak:

And as you, as you rightly point out, it hasn't happened yet. But when it does, there will be a different problem in place. But assuming that all inheritance is tax free, they will be able to take all of that money and use it immediately.

The first thing that I think people should also tell their next of kin is do not give loans from this money. Take your own money, build your own money and then give loans as a different thing. But inheritance is supposed to take care of you for 40 or 50 years. If you loan it away right now, you are going to suffer at the time when you need it the most, which is the end part of this 40 years, and it may be a lot of things. It may be family that comes and asks you for loans so that part of it is more complex but lock it up into these financial assets as soon as possible that allow you to say, ‘listen, now I'll keep it for a long term’ and let this money give you returns.

I'll give you an example. One is an RBI bond.  RBI bond gives you currently about 7.15%. But it may fall. It's a little bit of a floating rate thing. This RBI bond is locked in for seven years, so you can transfer it. You can't sell it. You will only get cash flow for seven years. This is a great product to buy because it ensures that for seven years you can't sell the money. So if you have 1,00,00,000, you might put 20 or 30 lacks into this saying this saying, ‘whatever else I do with the money, 20 or 30 lacs remains constant with this RBI thing. It will come back to me only after seven years, so that way I don't spend it. But I get a very decent return on that money meanwhile.

Remaining 70, I can put in more liquid mutual funds or in debt mutual funds or in equity funds, or however the case may be. But to less complicate the matter, I simply say put a three-year barrier. Emergency funds, three-year funds and anything more than three years. So emergency and three-year funds have to be in fixed deposits or debt. Anything more. You can add a small layer of equity will be 20% if you are not at all savvy.

More if you are, you know, financially savvy. One thing is don't listen to bankers. I come from a family of bankers, and you know that era was a different era. But I think today people sell you the wrong kind of stuff. Don't listen to people who have a vested interest in not telling you the right kind of information.

Shray:

Deepak, would you be OK if I pressed you for some names now? I mean, imagine someone listening to this and wants to know forward this next 30 seconds of this podcast to a person who just recently received these proceeds. You said put some fewer number like six months, one year of expenses into an FD, put another couple of years of expenses into another FD, maybe with another bank if you so wish. Now you still have, say, a pot of money left over, just throwing it out there. Let's say you wanted to do 50-50, although that's a bit risky, I guess. So let's see what about 50% in debt mutual funds and 50% in equity. As of today, this is what early June 2021, could you just in the spirit of helping out people who are not familiar with this, could you name one equity fund and one debt fund where if the person puts money, it won't be optimal, but it would not be a terrible decision they regret most likely.

Deepak:

Absolutely, so here's the thing. If you talk of an equity fund, I think nifty index fund, there’s one from ICICI, there's one from UTI at the moment, there will be more others as well. Just buy that. Yeah, because the reason I'm saying that is that this is cheap, they charge very low fees, but the second thing is you're not financially savvy. You don't know which fund is doing well, and every fund changes its stripes every three or four years. You don't have the time to analyze all of that stuff, you just put it into that Nifty index fund and leave it there. There will be no exit loads or costs. On the debt side, I would say think of the RBI bonds if you want to lock in your money for a while and whatever else is remaining, you can buy something very simple. I'll give you the simplest form of funds today.

There's something called PSU and banking debt funds of course. Here also, life is a little complex because some of them buy really bad debt instruments, so you have to be careful. So today IDFC, banking and PSU fund debt fund has nothing that is strange so...

Shray:

What if you become less risky than this also Deepak, and just give people one of those, those Gilt funds, or those ones ...

Deepak:

Yes, I think the best thing is, government securities fund. If we look at the Government Securities Fund it is almost always, over a three-year period, given positive returns. Now the positive can be 3%, the positive can be 15%. That depends on interest rate cycles but considering you don't have the ability to understand interest rate cycles you don't want one thing. You invest your money in a mutual fund and that mutual fund says ‘listen, we gave some money to some corporate and it shut down.’ The government won't shut down. The government will always pay back in India. So, you can then invest it in a government securities mutual fund. They're called gilt funds and there are many of them. There's an ICICI Gilt and there's an IDFC gilt fund. These are the better ones of the lot, but most Gilt funds, even Nippon, they're fairly good in a sense they invest in government securities only. They cannot invest in anything else, so they can never come back to you and say ‘listen, we lost money because the government didn't pay us back.’ So that's not going to happen.

And I think that is critical to investing and sleeping peacefully. You will not get the best returns and I think you should embrace that. Great returns are the matter of putting a lot of time into it. It is not a matter of - somebody told you that you'll get great returns with this and therefore it's what you should do. You just look at something that says this ‘I want the least amount of non-peaceful sleeps because I have other reasons to not sleep peacefully.’

Shray:

I mean we have closed ones that just passed away, so I imagine you have enough stuff going on, yeah?

Deepak:

Yeah, really grieving. So you don't want this other thing to come, and you know the hassle of say ‘the market fell 30%, I'm finished.’ That's why I said 20% equity is good for such situation or 50% if you're more savvy.

Shray:

Ah, OK, that's right. Or richer in this case, perhaps like if you received an enormous inheritance in this case.

Deepak:

Yeah. Also, importantly that this takes away having to do something on it every year.

Shray:

Yeah, yeah you can just stay with this forever, right? Basically, you're done it. I mean, yeah, you're done. I mean, for decades and decades at least basically.

Deepak:

Yes, and decades. So, if you started with 20% equity in about 15 years, we might end up becoming 50% equity. Just because equity is grown faster than debt, but...

Shray:

Or if it happened last year, you would already be 50%.

Deepak:

Yes, last year was almost like if you put 50% today, would be 80% and then calling up and saying what do I do with it?

Shray:

What do I do now? Yeah, so on that note Deepak, thanks for putting your neck out there and giving a few names. I think we'll take it in the right spirit. And I think we're ready to end this part of the discussion now, unless you have anything else to add.

Apparently, you have an offer for people who've made it this far in the podcast and wanted a discount on premium. Is that right?

Deepak:

Yes, if you have. On Capitalmind Premium, there's a podcast discount for people who want to sign up. It's a (listen to find out), our website is capitalmind.in

If you just type (listen to find out) when you sign up, you will get discount on Capitalmind Premium, which is specific to the listeners of this podcast. And it's conveniently hidden right in the middle so that you'll be able to hear this when you come so far, but you know, do sign up. We discuss a lot of topics and hopefully this has been enlightening to all of us as well.

Shray:

Well, as I said, it's good to have called a spade a spade and have this discussion. Thank you so much, Deepak. And I'll move on to Harsha, so thanks!

All right, everyone, Thanks so much to Deepak for sharing his point of view, but given the nature of the subject today, we thought we would bring in one of our customers, a friend who's a lawyer and who's dealt with stuff like this in the past and continues to do so right now. We call him Harsha. His full name is Harshavardhan Ganeshan, and you can find him on Twitter as well. We'll share his handle in the show notes and will mention that.

Welcome, Harsha. Thanks so much for agreeing to join us and I think I'll just start off with, we've heard what Deepak has to say and that's how maybe a finance person or an investment professional thinks about all this but, when sort of the rubber hits the road and, in the end, if there's an estate of any size or something of any complexity, folks like you do need to get involved. Lawyers do need to get involved, and they may have a different perspective on things. So, as you know, Deepak is all about make a Will, document your investments, just delineate everything and then hopefully things will be fine. And of course, come to Capitalmind at the end with the money and invest it with us. But when you hear about this situation from your point of view, is this advice resonating with you as well? Always have a will, just have a nice spreadsheet with all your assets, is this it? Is this the Holy Grail or is there more to it? Or do you have perhaps a slightly different take?

DISCLAIMER: There has been no advertisement, personal communication, personalized legal advice, solicitation, invitation or inducement of any sort whatsoever from Harshavardhan Ganesan. 

Harshavardhan:

Hi Shray! First of all, thank you so much for having me on the podcast. I think that, while Deepak is absolutely right in terms of documentation is king! Right, there's nothing that comes close to documentation in terms of making sure people have everything in place, so that it makes it easier for the people who are left behind to have a look at it. 

The issue with regards to whether or not to have a will, I don't think it's so clear cut. I really do think it depends on a case-to-case basis, and I think that there are sometimes, for example where we would say don't have a will, it just makes the process simpler. I think that those types of situations definitely arise, and that's something that we see as well and something that we do advise to clients, which goes against the usual mainstream idea that you have to have a will.

Shray:

Now, that is very interesting. This is almost like blasphemy. Harsha, can you go into this more?  When does it make sense to have a will and when does it not? I mean, is it just the size of the assets or is there more going on here?

Harshavardhan:

Sure, absolutely. So, I think the way I think about it is, probably to just give you a timeline type of situation in terms of what happens, I think that would be easier to look at what happens after a person’s demise. Just in terms of the documentation that's required, the first thing that you'll have to look at is obviously the death certificate. So, the death certificate is the starting point after a person passes away. After the death certificate, you basically apply for a legal heirship certificate, which usually takes 15 to 20 days, and you'll have to apply. Each state is very different, so you'll have to apply as required. After the legal heirship certificate, there are two different situations that may arise.

One - the person who had passed away leaves a will or Number 2- The person doesn't leave a will. Now in the case that a person does leave a will, depending on where the person’s property is, will have to be probated. So, it will basically have to have a seal of the Court. Instead of having too much legal jargon, basically there's either a probate or letters of administration, but the idea is the same. That is, the court will have to sanction that this will is valid, and we'll go ahead and ask for the executor of the will, to basically carry-on activities like selling the property etc.

The other situation is where you do not have a will. In that case, you have to apply, especially in case if there are any debts that need to be accepted or need to be taken in by the people, the legal heirs who are left behind, for a succession certificate, for which again you go to the District Court or to the local Court in your jurisdiction, where the person passed away or where the properties are, and you go ahead and ask for a succession certificate and the court thereafter issues it.

Now that we understand the overall structure, the reason why we sometimes, and of course, there is no straight jacket formula to this, but sometimes why we do tell people you don't need to make a will, is because obviously the amount of time and investment in terms of making a will sometimes does take a while, but more importantly, in case that everything within the family is hunky dory, in case that you only leave behind your husband/wife and say one child or two children and everybody in the family is quite happy. In that case, it makes sense not to have a will, because usually, depending on different religions, it gets split almost evenly. So, for example, in Hindu law, there is something called Class One heirs and then there is Class Two heirs. So, suppose that a person who passes away has a brother, a husband and two children. Here, the brother is a Class Two heir, the husband and the two children are Class One heirs. So, if that person passes away Intestate, that is without a will, then automatically the property is divided as one third one third one third between the husband and their two children. Assuming that the husband and two children had also passed away before the person in question passes away, that means they are predeceased, and only the brother is remaining, then in that case the entire property goes to the brother.

Of course, it is a very bad situation in which you don't have Class One heirs, Class Two heirs or any heirs, then it becomes Cy Pres, and it goes to the government, but we won't get into that right now. But this is basically how it works. So, if you are pretty sure that there is not going to be any squabbling over the property after you pass away and people are pretty clear and everyone is going to continue to be together, then the property that you have acquired, which is a self-acquired property, you don't really need to have a will because as I said, what happens after your death is that the executor, who you basically go ahead and appoint, will have to carry out your intentions and will have to carry it out after getting the seal of the court. Now, that process does take a while, just in terms of gathering everything and applying for court. The usual time period taken there; I would say it's difficult to give a time period to courts but say it’s around six months.

Shray:

OK got it. So Harsha, it remiss not to ask this at the beginning, but I felt it would be better to build up some of your credibility through these answers first. Could you just tell us a couple of lines about what you do right now and where you work and why you're so familiar with all of this? Because this isn't just like relaxing reading in the evenings, right?

Harshavardhan:

Thanks, Shray! Yes, So I'm working as an advocate. I practice in the Madras High Court with the Chambers of Mr Parasaran and we deal with quite a few civil cases in this regard as well. So, we have legal advice and advisory work in terms of people who come to us in terms of planning for their estate and people who have unfortunately been left with an estate, and they also need to know how to go about it in the future as well, so that's probably my Expertise.

Shray:

Ok. So ,we will draw on that expertise even further and so Harsha, my next question is about the situation where let's say you're the person with the assets right now and you want to recognize or give some contributions and money to people who may be helped you and looked after you like, maybe household staff, maybe some friends and relatives who are not that close, but who came together in your moment of need and have been helping you out and so you'd like to give them a hefty chunk of let's say, your assets. Even if you don't have famous level family feuds, the fact is your family may not be thrilled with these decisions. So, they may be slightly unhappy or have an adversarial relationship with the recipients in this case. So, if you have a suspicion that things won't go so smoothly, I think you've been through cases where families have then gone on and challenged rules as well, right. So, what advice would you have to people as they think of wanting to expand the net and not just sort of pass on everything to their Class One heirs or whoever is the most natural line of descendants, but also to other people who they just like to help out. What advice or best practices do you think you could share about that? 

Harshavardhan:

Sure. Well, I think that the best practice they're in, is definitely to make a will because the will basically would supersede, say, how it would go otherwise. So, if you had a spouse and two kids, and instead of that you want to give it your house help or to other people, then obviously you'll have to make a will and to direct most of the assets, perhaps to go to them. I would also request for them to have it registered and to have two witnesses.

Shray:

Sorry, Registered where?

Harshavardhan:

It depends, but you usually register it with the local Sub Registers Office.

Shray:

Got it.

Harshavardhan:

So, in that case, once you get it registered as well, it's usually under lock and seal. So, that will usually stay. Of course, it is possible that somebody comes in and says, ‘Oh no, a later will was being made, et cetera, et cetera.’ But at least the burden would be on them in that case. In legal parlance, we say there's at least a prima facie validity when the will has been registered. So that there's at least an idea that, yes, this is, you know, it hasn't been forged or there's at least a prima facie review that it hasn't been forged, but it it still needs to be proved in court. So, when you do have situations where there are, say, any sort of family members who come in and they say, well, you know, we were leading a great life. I don't understand how the entire property or say it's 3/4 of the property has gone to A particular person or B particular person. They will usually need to prove that, and those defenses usually come up all the time. They will say that the person was not in a mental state of mind,they will say that they were suffering from certain illnesses which didn't allow them to make these particular decisions, they might say there is a new will, they might also say that the person’s signature was forged. They might say that they just signed on a blank page and they just had the person draw it up and the deceased person, before their demise had to just sign on a blank page.’ So these are usually defenses that are brought up all the time. It happens all the time, so it's usually not a very open and shut case when it gets messy, so when it gets messy it becomes a real problem.

 

Shray:

That honestly sounds, out of like a badly written book. But unfortunately, I can see your face and you're not making any of this up, unfortunately. So OK, I hear you, but I think again the advice goes down to being well organized, document things clearly, get it registered, have witnesses. I was maybe even thinking out loud like have videos, recordings or something maybe or and maybe even initiate some transfers or something to that extent. OK, well that's it. Now, sort of just trying to draw close to it, look when you if you try and summarize what Deepak told us in the first 3/4th of this podcast, his advice boils down to ‘be organized, have a will, tell everyone, have a few people who have your laptop password, your phone password, your email password. Could use a password manager’. In fact, he forgot to mention that, and he's just pinged me right now. So, use a password manager so that people can access all your accounts and that does sound well and good. It also does sound a bit like you could just be a better person. So, I mean fine. But maybe, just practically speaking, from your advice, what advice do you have to share with people? Because look, I mean being a better person is also like get up at 5:00 and go running for like one hour every morning, right? But not everyone is going to do that. So, what do you have to say that from a legal point of view, how do you keep this- A non-legal problem to the extent possible or just what's your best practices and advice you have to share to everyone at this stage?

Harshavardhan:

Sure, I think that there are just certain things that I think people don't think about or just refused to do for a lot of reasons. I think one is something that Capitalmind tackles all the time, which is the taboo revolving around money, right? So, I think that it is good if there isn't just one person who's aware of money or if that is the case and it's, say, there’s a certain demise, that obviously leads to very bad consequences because the person who's left with an estate doesn't have any idea in terms of what to do. Therefore, I think obviously just the taboo surrounding money number one, I think. Increasing financial literacy is super important, but more practically for example. Just to give you an example, something that we advise clients is to ask them to liquidate their landholding.

So, if people have a lot of land situated and strewn across different areas, which honestly, they themselves might not know that they still have, liquidate it, before you pass it on without getting into the debate in terms of whether or not land is a good financial asset to hold, etc. The reason why we ask people to do that is because when you don't look at a property like land and say that it's somewhere around the outskirts, you're not really sure where you don't really have a person to take care. You'd really be shocked Shray in terms of the number of times there's encroachment that is illegal construction. Even in my own situation, I remember going to a property that was situated somewhere outside and a relative of ours said they had purchased the property. When we went there, we were shocked to find that a concrete structure including almost a commode for the laborers in a parallel property were constructed there, and it took us around three months just to get that demolished.

So that's something that we usually look at. We usually ask for people to liquidate their landholdings. I think that's a good idea because mutation of land records becomes an issue, but usually I think overall, a good practice would be to definitely consult a lawyer. Obviously, in cases where it's an accidental or it's a sudden death, it becomes a lot more difficult to do so. But in cases where it is a situation of old age etc, it's a good idea to consult a lawyer both before and after, so you're generally aware. I think the idea always is, going to a lawyer is not like going to a doctor, so it’s the idea that it has to be something really wrong in case you go into a lawyer. But I hope that that attitude slowly changes because it is really important for you to understand what your rights actually are. Usually, we think that we have certain rights when we don't. Usually, we don't even know that we have certain rights when we do. Something that even I think was touched on earlier is what do you do when someone comes and says your father owed me X amount of money, right? A lot of people don't know that there's a difference between secured debt and unsecured debt. If they have secured by a way of collateral -property, then that's different, but if it's unsecured, then it's only to the extent that how much ever you got. So, if the amount of estate that you got was X amount and that person asked for 100 X, that doesn't work. You can only pay X amount. You're not supposed to pay through your nose. It's just little things like this, I think as things people lack and it really does work on a case-by-case basis. So, it's usually a good idea to consult a lawyer and get some idea as well. But overall, I think this documentation, the passwords are absolutely vital and just making sure that the people around you, who you can trust at that point of time know where everything is. So, documentation definitely is Vital.

Shray:

One last question that came to mind, if think, perhaps as if it's not an accidental death, or even if it is, and maybe as a part of preparation? Would it make sense for a person to create a will, of course work with the lawyer and even introduce the lawyer to the key beneficiaries of that will around, so that they know how to go to when the time comes? Would that be something that makes sense, or would you not advise that because then people start thinking too much about the inheritance?

Harshavardhan:

Yeah, I think that is actually something that is a good idea because, usually like family doctors, most people usually have family lawyers, that is just people who they usually go to. So, I think it's just a good idea, especially if you make a will and you're aware that certain people are strange in the family or there are other people who you know are going to create issues. It's usually good to make sure that who you intend to be the benefactors or the beneficiaries of that will, know who to go to so that they know that there's somebody in that corner also. If it is going to get ugly, and especially if that's what the testator wants. If he knows it's going to get ugly, but he says you know what ‘I think this is the right thing to do, and that's his intention or her intention for that matter. I think it's very important that they definitely are introduced.

Shray:

Wonderful. Well, thanks so much Harsha. Thanks for being so generous with your time. We really appreciate it, and we hope that this podcast is useful to whoever is listening it and fingers crossed, let's hope we all lead amazing long lives with peaceful, blissful inheritances to your next of kin or whoever you want. But if not, do pay attention to what Deepak and Harsha had to say and just get things in order. So, thanks once again, Harsha! Much appreciated.

Harshavardhan:

Thank you so much, Shray.

Shray:

Well, everyone, that's our show. As always, you could reach out to us at Capitalmind_in on Twitter or at Deepak Shenoy on Twitter as well and will mention Harsha’s Twitter Id in the podcast. It's harshagana28 on Twitter. So, thank you so much everyone. Much appreciated and see you next time.