Due Diligence. Simple steps for financial closure

Death of a near and dear one can be harrowing. Still, besides emotional closure, financial closure becomes inevitable. Even when there is no legal dispute, ensuring that dues are paid, claims are made, accounts are closed and a smooth transfer of financial assets takes place, requires some planning and work.

Before you approach any institution — banks, insurance companies, mutual funds and government agencies — you need to have a death certificate. You must also check how the various accounts/investments have been held by the deceased — whether singly or jointly and if there is any nomination made. Having a will, preferably registered, usually smoothens asset transfer. If there is no will, the legal heirs must get a succession certificate from the court.

After you obtain these documents, take stock of the assets and liabilities. Make a list with account information for investments and assets as well as liabilities. You must then collect documents relating to property, bank account, de-mat account, mutual fund/provident fund investments, bank lockers, post office deposits, bond investments, insurance, loans, credit cards, and so on.

All loans must be paid off or transferred so that the loan account can be closed. It helps to first know the amount of loans outstanding and assets available for repayment. You can talk to the lending institution to get details on the loan dues. Based on this, you need to determine which investments you would sell-off to pay the dues. For instance, certain insurance policies may be tied to loans and would pay off the loans.

Legal heirs, who will get the share of the assets, also have the onus to settle all liabilities. This includes unsecured loans as well as any unpaid credit card dues. Tax returns also need to filed and tax dues must be settled

You may want to close or change account holder information for various accounts such as mutual funds, bank and bonds. The procedure is similar in many institutions and depends on the type of account and if there is nomination.

In case of joint accounts with survivorship — for instance, either or survivors — then, the survivors can apply for the change. The institution would typically require a photo copy of the death certificate for their records. The survivors/legal heirs are also free to close the account. For joint accounts without survivorship, the deceased person’s share would be paid to the legal heirs.

For accounts with nomination, the nominee can apply with a copy of the death certificate and the nomination number. You may also need to submit signatures from two witnesses.

Similarly, if the bank locker account has nomination, the nominee can access the locker and remove the contents after providing death certificate and proof of identify. The bank would first prepare an inventory of articles in the presence of the nominee and two witnesses. If there is no nomination, a similar procedure will be followed, but for the legal heir of the deceased.

You can follow similar steps as for any other investment to change the current, savings and fixed deposits in a bank. If the balance in the account of the deceased depositors is not large, the claim may be settled without much documentation and within 15 days.

But before you close or change account holders, it is good to ensure that transactions set up for this account are updated accordingly. For example, there may be ECS payments set up for the account. To avoid payment rejections and fines, you must first look at various services in the name of the deceased — such as electricity, phone, subscriptions, housing maintenance, charitable donations — that may be linked to the account that is closed.

Likewise, there may be deposits such as interest received for bond or post office investment or rentals that come into the account. These must also be handled before the bank account is changed or closed.

You may wonder if there may be any withdrawal implications if any changes are made to fixed deposit or long-term bonds. There are typically no penalties in case of fixed deposits if the maturity period and amount are unchanged. The survivors may split the FD into multiple accounts and can hold it to the tenure at the interest rate set when the FD was opened.

Bond investments can also be held for the full tenure after name transfer. To make the change, you must submit an attested copy of the bondholder’s death certificate along with the bond certificate. If the bond is held jointly, the deceased bondholder's name will be deleted. For sole bond holding, the bond will be transferred based on their will. If there is no will, the legal heirs need to produce a succession certificate or letter of administration to get the name transfer done.