Who will manage your bank accounts and investments if you become incapacitated someday? Details here

Most people make plans for what happens to their money after death, but few consider what happens if they are alive yet unable to manage their finances. An accident, illness or other incapacity could leave someone unable to make important decisions about their bank accounts, investments and insurance.

You could have enough savings to pay for the treatment and household expenses of yourself and your dependents, but that money may not be of much help if nobody knows where it is and how to access it.

Therefore, planning ahead can ensure that someone you trust can manage your finances if you are unable to make decisions yourself.

Maintain a record of your assets

A common issue many family members face after their loved one’s death or incapacitation, 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 during such situations.

Therefore, investors should maintain a comprehensive record of all assets and liabilities in one place, as it can save their legal heirs from unnecessary stress and confusion during such times.

But if no records are available at the moment, here are some ways you can consider for tracing a person’s financial assets:

• Physical documents and IDs: The family can begin by searching for bank and other investment documents at home such as the person’s bank passbooks, cheque books, diaries, or PAN card and bank locker key.
• Income tax return: If the incapacitated person was filing returns on their own, then the family members can try accessing the individuals tax returns on the income tax (I-T) portal.
• Email and phone number: If family members or legal heirs have access to the incapacitated person’s email account or phone messages to access OTPs, then they can use that to generate a Consolidated Account Statement (CAS) and receive details of all the MF investments linked to that email.
• CA or tax advisor: Yet another crucial source of information can be the incapacitated person’s CA or tax advisor as they are likely to have lot more details about a person’s investments. These professionals can give clues on bank accounts and the kind of incomes filed in ITR which, in turn, can be used to trace investments made.

Experts note that bank statements can be the first window into someone’s financial life. “Even if there is no asset list, statements can reveal SIPs, insurance premiums, dividend or interest income, EMIs, property payments and transfers to other accounts,” said Harendra Zatakia, a Sebi-registered investment advisor and founder of Wealth Aligned Financial Advisory.

Hence, by going through the statements carefully, the family can often discover investments or accounts they did not even know existed.

“This is why I encourage families to maintain a simple financial map—a list of bank accounts, investments, insurance, properties, loans and important contacts. In an emergency, the family should not have to search for the wealth they have inherited,” the expert added.

Appoint a power of attorney

If the incapacitated investor has the ‘capacity to contract’, then power of attorney or a mandate letter or authorisation letter may be used. This basically refers to appointing a trusted person to handle your financial or legal affairs if you are unable to make decisions on your own.

However, in cases where the incapacitated person lacks the ‘capacity to contract’, a guardianship certificate from a court would be required.

In both cases, a doctor’s certificate, in-person verification by the relevant depository or registrar, the thumb impression of the investor instead of her signature, and online login credentials will be needed.

“A Power of Attorney can help a trusted person handle specific financial matters when someone is unable to do so. But it should not be seen as a complete solution for incapacity, particularly where mental capacity is involved,” Zatakia noted, warning that such a position of power can be misused.

When to consider a private trust?

For very wealthy families, a properly structured private family trust can provide an additional layer of continuity.

“Assets placed in the trust can be managed by appointed trustees according to the trust deed. So, if the individual later becomes incapacitated, the trustee can continue managing those assets without the family having to figure everything out at that difficult time,” the expert advised.

For most families, the first step should be to organise financial records, review account operations and nominations, and identify who could legally manage important financial matters if you were unable to do so.

The most important point is to plan while you are still healthy and capable of making decisions. “For affluent families, a combination of a will, nominations, an updated asset list and, where appropriate, a family trust with the right trustees can make wealth management much smoother during both incapacity and succession,” he added.