Three Mistakes People Make Bequeathing Wealth
Have you ever thought about who will collect your wealth after your death? Well, there are three ways that a person can pass their wealth to another person: joint accounts, nominations and a will. Some people may use all three of them, while some people may not know anything about bequeathing their wealth.
Here are three common mistakes which people make while bequeathing their wealth:
1. Not knowing what a joint account means
You can make anyone a joint account holder in some financial instruments, such as bank accounts, fixed deposits, mutual funds or real estate properties. Most people choose to make their spouse the joint account holder. This method is more powerful than making a nomination or a will, and ensures that the joint account holder will be able to operate your account after your death, instead of just having to withdraw the balance.
Here, there are two modes you can select: ‘either or survivor’ mode and ‘former or survivor’ mode. If you choose ‘either or survivor’ mode, the joint account holder would be able to operate the account along with you, while you are alive. If you choose ‘former or survivor’ mode, then the joint account holder would only be able to transact after your death. In fact, he or she would become an owner of the account after your death, without any problems.
2. Ignoring or forgetting old joint account holders
Many people create joint accounts with their parents, siblings or friends when they are young and unmarried; but later on in life, want to pass on their wealth to their spouse and/or children. To do this, they may enter the name of their spouse as a nominee, or draft a will (for stronger documentation). However, once they die, such a will or nomination will be USELESS, because the account still has a legitimate owner: the other joint account holder/s. In case of joint accounts, the wealth can only be passed on if all the holders, not just the primary and secondary holder, are dead.
Note: Nominations can be used to leave someone your wealth only if there are no other people to claim it, while a ‘will’ works to transfer the rights to another person, after the owner passes away.
3. Laziness in changing old nominations or old wills
Many people don’t bother to change old nominations in various financial products, like life insurance policies, mutual funds or bank accounts; thinking that a ‘will’ will override all such nominations. They may have nominated one person to get their wealth in the event of their death, but mentioned some other person’s name in their final will. This could lead to a lot of complications and court cases, as the nominees and the will beneficiaries, fight to claim the wealth. In many cases, courts have awarded such wealth to the old nominees, rather than the person/s mentioned in the will (usually when clear directions were not given).
Such confusion can also happen if a person has made an old will, decades back, and forgotten to change it to include new family members (spouse or children). A common example is bequeathing property to a sibling, who may not want to transfer it to the widow or children of his brother, after his brother’s death.