Rs1,09,544 crore. According to the Reserve Bank of India (RBI), this is the money in unclaimed deposits in all scheduled commercial banks in India in 2007 . Add another Rs3,800 crore of unwanted money with the Employees Provident Fund. And several thousand crore more of unclaimed funds with the Life Insurance Corp. of India (LIC), for which I do not have any data, but expert estimates say it would be in four digits with a crore sitting comfortably behind. Why would somebody sweat away at work, stay away from kids, lose out on taking holidays and doing what they really loved, fight, scheme, machinate to get money under their belts and then die with all of it lying unwanted in some cold vault in the innards of the Indian financial system?
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Unclaimed millions and crores is not a uniquely Indian eccentricity; news reports of unclaimed millions in life insurance companies in the US and the UK are plenty. Across the world, a chief cause of unclaimed money seems to be bad communication. Somebody simply forgot to tell the spouse or kids or siblings about the assets he created. It is difficult to visualize your own death and, therefore, difficult to imagine not being around to collect that deposit or bond or mutual fund when it matures or redeems. This is changing, though. A thin sliver of population that passes the twin filters of being urban affluent Indian and working with a financial planner shows a greater acceptance of their own mortality.
Bangalore-based financial planner Lovaii Navlakhi says: “The number of people who have their wills in place is between 3% and 10%. However, the number wanting to create wills is rapidly increasing.” Other planners agree that while there is resistance to making a will, the 40-something urban Indian is fast understanding the wealth-depleting implications of not having a road map in place in case of an untimely death. The other observation is that the parents of affluent Indians are leaving this world intestate or without having a will in place. And it worries the financially mature person no end.
For this 40-something knows that he will have to begin conversations around money and estate planning soon enough to nudge a parent into making a will. It is possibly the worst conversation in the world to begin, but one that will have to be made. To trace the financial life of a person who is not around to tell you where that policy document is, who has the keys to the locker, how many bank accounts there are and the details of the share certificates is a horrendous task. People who have been through the process of piecing together a life gone by say it is like putting together a jigsaw puzzle. Add the Indian legal and procedural system to this to make the emotional trauma of loss hurt even more. Other than the operational issues of having to complete the paperwork, the lack of a will prevents the family from knowing what the person would have wanted to do with the wealth he accumulated. Maybe he’d have wanted to give it all away to a loved religious order or to the charity where he worked. Lack of a will causes the court to apportion assets in the manner the Succession Act delineates.
Facilitating the estate planning of a parent is one of most touchy subjects in a family. Years of stuffing things under the carpet, of growing-up issues, of post-marriage family dramas, of sibling rivalries, make talking to your parents about putting their financial affairs in order a minefield of possible emotional explosions. One reason for the difficulty is the continuation of the parent-child role that somewhere centres around control and makes it tough for the parent to accept that the wheel of time has turned. For the adult child, the unpleasant thought of having to look clinically at the death of a loved one prevents such a conversation from even starting.
A US-based in-home elder care company, Home Instead Senior Care, uses the 40-70 rule that says if you are around 40 years old and your parents are around 70, then you need to begin conversations around estate planning. In our context, it helps to have a trusted uncle or family friend as part of the conversation to break into this difficult, emotional-trap-ridden conversation. Will dad think I’m trying to grab his money? Will mum cry? Will I end up bawling? After the first ice breaker, the idea is to communicate that a will is really a way to continue to control what happens to money, even after you are gone. It is a way to allow your spouse to continue leading the life she is used to.
Nobody said being the middle-aged, financially savvy urban Indian was going to be easy, but even death has its funny stories. This one has just been told on chat by an insurance veteran: Some people would buy a very large single-premium policy (that would work as a fixed deposit and carry an insurance amount) and then destroy the policy document. They fear that some people around them would think their lives worth less than the money they’d get if they died (or were done to death). So they burn the policy document. If they survive till maturity, they’d simply get the insurance company to issue them a duplicate policy. If they died in the interim, they’d simply add a few zeros to the stock of unclaimed money in the country.
Monika Halan works in the area of financial literacy and financial intermediation policy. She is consulting editor with Mint and adviser, Pension Fund Regulatory and Development Authority, and can be reached at firstname.lastname@example.org