Property inheritance: How this one document can prevent family disputes later

A missing property document may seem like a minor oversight but it can leave your family entangled in lengthy legal disputes during inheritance. In many cases, the absence of proper documentation makes it difficult to establish ownership or determine how assets should be distributed upon the original owner's death, often leading to disagreements among legal heirs.

This is why estate planning is important, which involves organising how a person's assets will be managed during their lifetime and distributed after their death. A well-crafted estate plan ensures your wishes are honoured, minimises the risk of disputes among legal heirs, and provides clarity during an emotionally difficult time. It is typically prepared with the assistance of an estate planning lawyer.

Five key documents for a strong estate plan

A comprehensive estate plan typically consists of several documents that states your wishes and preferences upon death or extreme illness. While not every component is necessary for everyone, the following documents may be included, depending on your financial situation and needs:

• Will: A legal document that states how your assets should be distributed and, if applicable, names guardians for minor children. This is the most common way of dividing assets and must be considered.
• Trusts: Helps in managing assets, reducing estate taxes in some cases, and avoiding probate (the legal process of transferring assets after death).
• Healthcare directives: Records your medical treatment preferences if you are unable to make decisions.
• Power of attorney: Authorises a trusted person to handle your financial or legal affairs if you become incapacitated.
• Beneficiary Designations: Ensures assets such as life insurance, retirement accounts, and investments are directly transferred to a named beneficiary without going through probate.

A nominee does not become the owner of assets

When you invest in a mutual fund, buy insurance, or open a bank account, picking a nominee is one of the first things you are asked to do. However, what many people may not know is that having a nominee on a bank account, insurance policy or investments does not automatically make that person the legal owner of the asset upon the original owner's death.

In most cases, a nominee acts only as a custodian until the rightful legal heirs receive the assets such as shares, property or insurance money. Hence, it is important to update nominations after major life events such as marriage, divorce, or the nominee's death and and ensure they align with your will.

Updating the nominee for one financial product does not automatically update it for your others. Banks, mutual funds, demat accounts, fixed deposits, insurance policies and other investments typically maintain separate nomination records.

This means you will need to review and update each one individually to ensure your records are consistent and your loved ones don't face avoidable complications later when they seek to claim your assets.

Why you should maintain a record of your assets

Another common issue many family members face after their loved one's death is that they have no idea about the full extent of a person's assets. Shares, mutual fund investments, bank deposits and even digital assets can remain undiscovered after the owner's death, making it difficult for the legal heirs to put everything in one place and determine who inherits what.

Maintaining a comprehensive record of all assets and liabilities in one place can save heirs from unnecessary stress and confusion during such times. It is also advisable to consult with financial advisors, estate planners, and lawyers who specialise in estate laws to create a robust estate plan.

Additionally, people should also not assume that estate planning is just for the wealthy crowd. It is a vital process for anyone who wants to ensure their assets and health care preferences are handled according to their wishes after their death or in case they become incapacitated.