Joint Accounts, Nominations and Wills How To Bequeath Wealth
There are three ways to pass on your wealth to another person after your death: joint accounts, nominations and a will. It is important to structure these three instruments in the best possible manner, so that your wealth can be easily transferred to the right persons after your death, without your dependents having to face any unnecessary legal or financial hassles.
Here is some more information on these three instruments:
- Joint Accounts: A joint account is an account that is shared between two or more individuals. It can be held in two modes: ‘either or survivor’ mode and ‘former or survivor’ mode. In the ‘either or survivor’ mode, the joint account holder can operate the account along with the primary account holder, while he or she is alive. In the ‘former or survivor’ mode, the joint account holder will only be able to operate the account after the death of the primary holder. Some financial instruments that allow you to specify a joint account holder are bank accounts, fixed deposit accounts, mutual fund accounts and real estate properties. Usually, joint accounts are created to avoid probate, and are shared between two relatives (eg. spouses).
- Nominations: When a person opens a bank account or buys some types of financial products, they will have the option to nominate someone to receive their wealth in the event of their death. The nomination form is usually a part of the common application form; however, it is not mandatory to fill it, and the nomination section may be crossed out if the applicant does not wish to nominate anybody. If filled, the applicant can generally change the nomination anytime in the future, by filling another form. Some financial products that allow nominations are life insurance policies, bank accounts, fixed deposit accounts and mutual fund accounts.
- Wills: A will or testament is a legal declaration by which a person (called the testator), names one or more persons to manage his/her estate after death. A testator may also name certain people who will receive specified parts of their wealth/property, after death. If a person does not have a will at the time of their death, inheritance laws for that person’s particular religion will generally apply.
Of the above three instruments, a joint account is the most powerful instrument for transferring wealth, followed by nominations, and then a will. Below are some best practices, which you could consider while bequeathing your wealth:
- If you are very sure that you want your money to go to a certain individual (like your spouse), ensure that you have a joint account with him/her, with yourself as the primary account holder.
- Ensure that the nominee for a financial instrument is the same person to whom you have willed your money in case of your death. It could be a big mistake to mention Person A as a nominee, but Person B as the will beneficiary, and such an oversight could cause a lot of unnecessary fights and legal hassles among your loved ones.
- If you had opened bank accounts or bought financial products many years ago (like mutual funds, fixed deposits, life insurance policies or real estate property); re-check the nominee’s name that you had entered for each account/ investment. If you wish to change the nominee’s name, fill in the appropriate form and do so. Else, you can also leave the nominee field blank, so that the beneficiaries in your will can easily claim the wealth.
Have you ever given a thought about who will receive your wealth or property after your death? Which of the above instruments do you prefer using for bequeathing your wealth: joint accounts, nominations or a will?