1. Tomorrow is not promised : None of us know how long we are going to live for? Discussing death can feel scary. But if you are to die or were otherwise incapacitated, would your loved ones be able to quickly locate your important information or know how to handle your affairs. We get so busy with the day-to-day life that we fail to make End of the life planning as a priority. One may think they’re too young to be hit with a serious illness or they forget that death has no age criteria. Any of these scenarios can leave a person’s and family member’s life uniquely vulnerable.
This pandemic (COVID-19) is also leaving a devastating effect on people to the extent that many are collapsing or becoming incapacitated. We are having lots of example like where head of the family or the only earning member of the family has passed away or became incapacitated due to unforeseen illness or natural disaster and there is no other person to handle his affairs quickly. This situation can create mess in your family after your demise or family have to face greater challenges.
Every person questions himself about what will happen with his dependents and family members after his death and can plan in advance. Addressing legal and financial issues associated with dying is important for several reasons. Proper planning helps avoid many of the problems associated with End of the Life and future planning for them and their dependents.
2. Need of End of the Life Planning : No one can truly plan for the disaster whether it’s an unforeseen illness, a natural disaster, but can put into place a series of contingencies and plan accordingly. When the person becomes incapacitated or passes away, it is necessary to plan for the emergency to save time, money and stress for the loved ones. It depends on the person’s wealth and what he do to make planning. The reasons for having the End of the Life planning in place before it is needed are endless.
End of the Life planning can helps in avoid many problems associated with succession and transfer of ownership. It protects your assets from going into the hands of unintended beneficiaries & determine who will manage your estate and also protects young family members who are not ready to take the ownership. This planning eliminates the family mess after your demise and avoid greater legal challenges. If you take the steps now to get your estate in order and plan for the future, it can make a stressful time potentially a little easier. People take life end planning as making the Will and by making a will they think that they have planned for their end. But scope of this planning is not limited to only making a will or note. This planning will includes:
- Instructions for your care if you become disabled before you die.
- Name of the guardian and inheritance manager for your minor children.
- Protection of the family members and dependents during unexpected and unfortunate events of their lives.
- Decide who gets your estate & property and who does not.
- Make gifts and donations.
- Leave instructions for your digital assets.
- Provide funeral instructions.
3. The End of the Life Planning Process : A person can plan the Legal as well as financial affairs in case of any sudden disability or death happens. The process would be depended on many factors such as Number of family members, Occupation of the person, Legal heirs, Wealth of the person, Assets and liabilities of the person. Though the planning will always be differ in every cases. However, we are discussing the End of the life planning related to legal and financial affairs to be done by a person :
i. Health and Life Insurance : First step to planning for contingencies is having insurance plan which provides financial protection. There are many type of insurance plan available related to insurance which vary on case to case basis as per need having its own relevance. Following options could be choose by a person while planning for contingencies related to health and life for himself and family members:
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- Health Insurance or Mediclaim: Mediclaim/Health Insurance is a type of insurance that offers specified financial protection against health- related expenses. It is a pocket friendly way to mitigate any health- related emergency for himself and his family members. However, the coverage of Mediclaim is limited to hospitalization expenses, treatment expenses due to an accident & specific diseases and other expenses are to be borne by the insurer himself. While the health insurance plan offers coverage against hospitalization charges, pre-hospitalization charges, post hospitalization charges, ambulance charges etc. and it also compensate in case of loss of income as a result of accident.
- Term Insurance : A term plan offers a lump sum paid as Death Benefit (Sum Assured). The coverage is available for the limited term of premium payment years. With a low premium, it covers substantial amount. This policy is a must-have for earning member of a family and provide financial protection for the family.
- Whole Life Insurance : A whole life insurance offers both, a death benefit as well as savings benefits. These long tenure policy helps in building a corpus for future needs.
ii. Estate Planning: Estate planning involves making plans for the transfer of your estate after death. Estate is the combination of everything that you own — your home and other real estate, current and savings accounts, deposits, investments, insurance, jewellery, vehicles, furniture, personal possessions and so on. An estate planning is making a detailed plan of the division of the estate in advance (who, what, when, how and how much), amongst the ones you want to give after his demise. This planning includes:
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- Listing of pool of assets & liabilities : A person should list out all the assets and liabilities with relevant details which he owns. The list must be updated regularly and must mentioned date on which it was last updated. Details should include identity, location, value etc. Make sure your spouse or children have access to these documents, which they will need to handle any legal & financial affairs after you die.
- Nomination: A person must do nomination for his bank accounts, lockers and all the investments. According to law, a nominee is only a custodian & not the owner and nominated funds or investments including insurance amount will be passed on to the Nominee whom you trust, who can further help, in process of passing it to your legal heirs. A proper nomination not only enables fast processing of receiving funds but also helps your loved ones to get the benefits of your policy when they need it the most and without any hassle. Otherwise, without nomination, the legal heirs will have to go through cumbersome process of producing all kind of certificates like death certificate, proof of relation etc to get those funds and investments.
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- Draft a Will or Testament : When a person die after making a will/testament, his beneficiaries/heirs inherit his estate/wealth. If a will is not made, then the legal heirs are decided according to the succession laws, where the structure is predefined on who gets how much. The succession laws are quite complicated and no one would want their families to go through lawyers and courts for the assets of their beloved deceased family members. Therefore, a person should make his will and update it regularly if he feels to distribute his estate as per his wish. Life changes, such as births, deaths, and divorce, can create situations where changing your will are necessary. A last will and testament is a legal document that lets you decide what happens with your estate after you die.
iii. Health Care Directive/Living Will: A health care directive or living will is a written document that informs other of your wishes about your health care measures should be taken to prolong your life in case you become incapacitated and unable to speak on your own behalf. The person creating the health care directive must be of sound mind at the time the document is signed. This document will only take effect if you become incapacitated and will be useful if you wish to have someone else make your health care decisions. Accidents that result in incapacitation may occur at any time, and without such a document in place, it is possible that your life might be artificially extended against your will. In such circumstances, your directive may state that you want someone other than an attending physician to decide when you cannot make your own decisions. It will also include- Donation of organs, tissues and eyes, Funeral arrangements etc.
iv. Conservatorship/Guardianship : A conservatorship (or guardianship) is a complicated court arrangement that gives an individual legal power over the financial affairs of another person. Conservatorship arrangements are pursued only when an individual is judged (by a court) to be longer capable of managing his or her own affairs (e.g., someone in a coma or in the advanced stage of Alzheimer’s disease). Conservators can be friends, family members, or court-appointed individuals from state agencies. Conservatorship works to safeguard the affected person’s financial assets by making sure that bills are paid on time, that money is allocated for savings, etc. Conservators can also help when the person they are watching out for is unable to weigh the risks and benefits of important financial decisions. The court-appointed conservator is required to make regular reports to the court regarding expenditures. Special permission may be required before any major financial decisions are made on behalf of the incapacitated individual, including the purchase or sale of major assets such as a house.
v. Power of Attorney: A power of attorney is a legal instrument that allows the person creating it to appoint a trusted individual to act on their behalf. A valid power of attorney expires once the principal dies. However, it will allow your trusted person to continue acting on your behalf even if you become mentally incompetent and unable to communicate. For example- If you appoint one of your family member as agent when you are alive, then that member will be legally permitted to pay your bills, manage your investments, file your taxes, sell your real estate properties, and more. However, those powers are no longer legally valid after you passes away.
vi. End of the Life Folder : We all do some planning about life end but fails to keep them systematic and make them available to the loved ones or family when they need it. No planning is complete without documentation therefore after doing this much planning, now it’s must to document all these planned details & information in one place. We call it as “End of the Life Folder”. The purpose of this folder is to have another layer of preparation for your loved ones in the event of your death, especially if it’s unexpected. An End of the Life folder is a tool to help you organize and keep all of your most important financial details and documents at one place. First, you have to determine how you’re going to organize your folder. It can be kept as physical folder or digital folder or both. Then a checklist to be prepared that include important documents and information to be included in this folder. This checklist will be prepared keeping in mind to include everything including financial and legal affairs & documents, which the person wants the family or loved ones to know about. Make sure you leave detailed instructions for your loved ones so they know how to access your files, especially if you’re storing it electronically. Hereunder are some examples of documentation that could be included in your in case of death file:
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- Basic Personal Information
- Copies of all KYC documents.
- Birth certificate
- Marriage certificate
- Living Will/ Health Care Directive
- Listing of pool of assets & liabilities
- Power of attorney
- Life insurance policy, Pension policies etc.
- Investments such as Mutual Funds, Shares etc
- Bank accounts, lockers and credit card details
- Loan documents
- Automobile titles
- Contact details of relevant persons
- Property deeds or any other important documents
- Copies of keys to automobiles, safe deposit boxes
- Account and device User ID & Password Credentials
Now after preparing folder, let your loved ones or family know that it exists. Tell them as part of your estate planning process, you’ve taken the steps to ensure everything is ready for them when the time comes. It is really important to keep it up-to-date (record the most recent date of any changes). It’s also common for people to make a copy and give it to their consultant or financial planner.
4. Conclusion : Thinking about your death or that of a loved one can bring up plenty of unpleasant emotions, but having a plan to take care of the details can ease some of the stress in a time of grief. Making decisions and setting an End of the Life plan in place now will ease some of the stress for your family and prevent them from making poor or rushed choices when they are in a time of shock or grief.
Complied by:
CA Deepak Khandelwal (FCA, M.Com, CCCA, FAFD)
CA Shilvi Khandelwal (DISA, LLB, FCA, B.Com)
Author Bio
Also important is the Advocate, CA etc., to be contacted. Process of filing ITR, mutation process etc.,
I wish some statrt-up or a firm undertake all these legal issues for a FEE.
If any such firm exists kindly let me know. My email is gmbharathi@hotmail.com.
Problems faced due to Covid ti when travel restrictions are in place and particularly when Children are Foreign Citizens.