Love-it-will-itI have been recently following the Malaysian Airlines (MH370) related news. I pray everyday for the passengers on board and hope it’s not a crash and soon some positive news will emerge. I also pray for their near and dear ones. Suddenly a chilling thought crossed my mind… many of these 239 passengers, would have their wills or estate planning in place? How many would have properly documented their assets or their bank details etc. so that god forbid if they don’t come back, their loved ones would have easy access to their estate?

Where there is a ‘Will’ there is a way

We spend a lot of time thinking about how to make more money. I am not sure even a fraction of the time goes in thinking through how we can safeguard what we already have, for our future generations. I have several very well-educated friends working at very senior positions in banks and other financial institutions. Their customers trust them with their life-savings and look up to their advice for investing. However some of these very friends haven’t even given a passing thought about creating a simple ‘will’ for their own assets. It surprises me to no end. How can smart people be so oblivious to basic risk management practices in life? Imagine something suddenly happening to one them and what their family members would go through. Imagine having to rummage through files trying to figure out where the bank account or investment details are, at such an emotionally difficult period.

People often make this mistake of thinking a will is not for them as they are still young, or do not have too much money saved anyway. It is even more the reason why they should safeguard whatever little they have so that their loved ones are not in financial difficulty if fate plays some cruel joke on them. Making a will is completely unrelated to the size of one’s estate or age, and every adult (both partners, irrespective of current title holder of assets) should have a will. If you think your bank is your best friend and your banker will come running after your partner’s death, to hand over all your partners assets, you can’t be further from the reality. I personally hold accounts in banks, which do not even accept a declaration of nominee. I would be stupid to trust them to look after my family’s interest after my death, in absence of a legally valid will.

Think through your Will

imagesThis is a key element of being “smart with money” and making a will requires thinking through. Any lawyer would be able to draft the final document as per your wishes and the legal framework of the relevant jurisdiction. However the workflow of what happens in different situations, would need to be decided by you and not your lawyer. After all it is your wishes, and procrastination would not help.

A friend recently showed me his will and he felt quite relaxed that he had one. While he has definitely taken the first step, I had to point it out to him that his will could be insufficient if something suddenly happens. He has carefully mentioned the % in which his assets should be divided between his children, but there is no mention anywhere about what those assets are and how his children can get hold of them. It’s like knowing vaguely that the treasure you inherited, is hidden somewhere in the farm by the river, but not exactly knowing where to start digging.

Wills and won’t(s)

Personal situations vary from family to family. However I can provide some examples of the various factors one needs to consider while creating a will. This is based on my own experience of creating a will. My wife and I discussed these simple issues, and the entire workflow became quite clear in our minds:

Sequence: What happens if one of us die before the other? What happens is both of us die together? What happens if something happens to all four of us?

Situation of our children: If both our boys are still minors at the time of our death (if both of us die), who would be in the best position to become their guardian. What happens if only one of them is an adult? What if for some reason the older one is not in a position to become the guardian of the younger one? What if one of the boys grows up and is not capable  or not in a situation of looking after his own best interests (things  happen to people when they grow up, however cute they might be at the age of 6 or 11 :-))? What if we are survived by only one of them?

Existing commitments: How do we ensure that our children (who are beneficiaries of our wills) take care of our existing commitments – family, charity, mortgage etc. ?

Executor(s): Who would be the best person to execute our will and ensure that the wishes are fulfilled? What if the executor is not available / alive at the time of our death?

Information Repository: How would the executors know where the assets are and the best way to access them? Who should be the best repository of the information? How do we ensure that this information about our assets is kept up-to-date.

Note: Just listing down your assets or your investment details in the will is not enough. What if you make a new investment or exit an existing one? You would need to keep updating your will after every new investment, and it is not very efficient.

Continuity of Investments: How should the investments be dealt with? Should they just be liquidated or should they continue with the same objectives till they are passed on to the beneficiaries? What happens to the ‘once in a lifetime investment opportunity’ that your bank relationship manager sold to you 3 months back 🙂 ?

Alive but not kicking: What happens if one of us is still alive but not in a mental capacity to make any decisions ? (How many of you are following Michael Schumacher’s condition?)

The above issues are by no means an exhaustive list and I am sure different people have different situations to consider. It is important to note that right at the outset it may not be possible to think through everything. However like many other things in life, a ‘70% perfect will’ is a million times better than not having a will at all. So if you don’t have one, the best time to start would be NOW. Otherwise without your knowledge, you maybe eventually handing over your assets to your bank or broker. If you have a will, please share with us your thoughts and inputs on what all you took into consideration. It will help everyone.

I would be discussing other simple risk management aspects in subsequent blogs, that would help you to safeguard your assets to a large extent. Share this blog with your friends and family if you find it useful and let them benefit from it too.