Loosing a loved one is always the most difficult phase that anyone can go through. It is even more heart breaking if it is an unexpected demise of a parent or a spouse. It takes people a long time to get out of the grief and move on in their lives. In such a low phase, for most people money matters, documents & various procedures, is the last thing on their mind. In many cases, it is even months before the family starts looking at these things. This can actually become a difficult situation the more it is delayed. Hence, it is helpful for the family/friends to help out the legal heirs / the immediate family members with handling these things properly & in time.
Below are some of the important things that need to be taken care of when a loved one dies:
Get a death certificate issued
This is the most important step but is unfortunately missed by a lot of people. It is a very critical document to prove the account owner’s death, for any financial matters such as account closures, insurance claims, transfer or selling of deceased’s assets or in many cases, even to access deceased’s assets. As a process, the municipal body needs to be informed about every death and get it registered within 21 days. After that, the death certificate is issued by the local municipal body.
In case of death in a hospital, the hospital authorities typically report the death to the municipal body and they get the formalities done. In cases, where the death is in abnormal circumstances, the doctor’s report, autopsy report and police report are also required.
While registering the death, one needs to make sure that the details registered on the death certificate should match the details in the official documents such as PAN Card and Aadhaar Card. A difference in that could become an issue when you go to the financial institutions to claim the assets. Even a common mistake like writing initials instead of full name can become a issue later on.
It is also advised to get multiple copies of the death certificate issued and get them attested, if required. You may need the original copies at every financial institution.
Gather all the financial documents
The most important and possibly the most difficult task is to locate all the financial documents of the deceased. If the deceased was an organized person and had arranged all the documents properly under different categories, the task becomes much easier. If not, then it is going to be a long and tedious process for the family to locate all the documents. Obvious steps would be to search for the documents at all the usual spots such as various drawers, desks, files & folders. In today’s digital age, looking across various devices such as a laptops, mobile devices, emails, cloud storages etc. can also help with a lot of important stuff. In case, the deceased used new age personal information management apps such as Sorted, looking for required information becomes very easy in these scenarios.
Once you have located the documents, it is better to segregate them into categories such as Insurances (Life, Health, Auto, Home etc.), Banking documents (Saving Account details, Cheque book, ATM Cards, Credit Cards etc.), Investments (Mutual Funds, Shares, FD, RD, NSCs, etc.), Assets (Land Documents, Home Ownership documents, Gold details, other property documents etc.), Liabilities (Home Loan, Auto Loan, Educational Loan, Personal Loan etc.), Vehicles/Appliances (RC, PUC, AMC, Warranty Documents etc.), Utilities (Gas connection, Electricity connection, Water connection etc.)
A lot of employers also provide various benefits such as health insurance, life insurance etc. Hence, it is always a good idea to also check with employer of the deceased regarding any such documents.
Check for a Will or Nominee details
Once the documents have been gathered, it is important to understand how the deceased had planned the inheritance of all their financial assets. Ideal scenario is when there is a will existing because it clearly defines how the deceased wants to distribute the assets among the family members.
In case there is no will, then you will have to check for Nominee details or Joint Account details on various investments, insurances etc. If there are already defined Nominees, then transfer of assets is easier by producing the death certificate of the deceased and identify proof of the nominee.
For scenarios where there is no Will and Nominee is also not defined, you will need to get a Succession Certificate issued from the district court. This will help in transferring the movable assets like fixed deposits, share investments, mutual fund investments etc. Immovable investments like property, where there is no Will, it will be distributed among all the legal heirs, as per the religion or country law.
Take care of all immediate expenses & liabilities
After gathering all the financial documents, it is important to evaluate all the liabilities / expenses that need to be paid, which were managed by the deceased on a day-to-day basis. This would involve basic things like utility bill payments to make sure the house functions as usual in absence of the person who was otherwise taking care of all this. It could also involve things like EMI payments, SIP payments, Credit Card payments, insurance payments etc. to make sure there is continuity maintained for all these, till there is final decision made about these things.
Having access to bank accounts of the deceased (joint account holder or knowing the internet banking details) is helpful. If not, then depending in criticality of the payment, the family members may have to pay up. If that is also not possible, then you will need to first get the bank accounts transferred in the name of the family member / nominee.
Notifying the various financial institutions & getting the accounts transferred or closed
Once all the financial investments, liabilities etc. are figured out, you will now need to work on the future aspect of these. There will be some accounts that you would like to recover money from & close them, some will be transferred & continued. It is important to understand the implications of closing an account vs getting them transferred, especially since a lot of the financial aspects are linked. For example, closing a bank account in a hurry could mean that any linked EMIs or SIPs can get stopped (affecting the investments linked to that). Any linked lockers will also get frozen and you may not be able to access the contents of it. Insurance payments may get stuck because they were linked to this bank account and the claim amount was supposed to come to this bank account directly.
Whether you decide to close the account or transfer it, there are well defined procedures for each kind of account, and it would require some documentation typically death certificate of the deceased, identity & address proof of the nominee / successor etc.
While transfer of financial accounts in the name of the nominee / successor is an obvious step, it is also important to notify the concerned institutions & get other things like Utility connections (phone, electricity, gas, water etc.), Vehicles, Health insurance etc. transferred timely. It will save you from issues later, such as an insurance claim, vehicle sale, providing address proof etc.
Tax filing for income before death & after
Tax filing is an important aspect but has a high chance of getting neglected. As it is tax filing is not on top of your mind and after death of a loved one, this is something that most people forget. Tax filing for a deceased has to be done in the same manner as it would have been done before. For any income from the assets of the deceased, after their death, the legal heir is liable to pay taxes. For the income before death, the legal heir don’t have to pay taxes from their own pocket and the liability is limited only to the assets that are left behind. This saves the legal heir from any extra burden but it also means that if there is some tax to be paid, it will have to paid from the assets of the deceased, even if it means selling them to get the funds.
All the above tasks are largely from the documentation point-of-view, but two important aspects need to be taken care of for the well being of the family that’s left behind. First is to protect the identity of the deceased by making sure that all their online accounts including email, social media etc. need to be shutdown, all ATM cards, Credit cards need to be cancelled etc. Second is to reassess the financial health of the family that is left behind and make amends to cater to the changed income / expense pattern.
This is a quick guide to help anyone who has to go through a situation like this, it could be the direct legal heirs or their immediate friends / family who are helping them out in this situation. Taking advise from a legal / financial advisor can be helpful making sure all these things are taken care of properly.
One of the core aspects of handling the above things is having all important & relevant documents organized at one place. This would make it much easier for anyone who is going to take care of these things properly for the family. Sorted AI helps with organizing & share all such documents without any hassle. Users can just upload documents as digital files or photos and it organizes all of them in various categories automatically.
Snehanshu leads Product & Strategy at Sorted AI. He is an IIT Bombay & ISB Hyderabad alumnus. He has more than 12 years of experience in consulting, operations & entrepreneurship. He loves to run and is a proud owner of a Golden Retriever.