The COVID-19 pandemic’s second wave unleashed misery across the country, leaving behind lakhs of distraught families. Children who lost both their parents find themselves in vulnerable positions. A special focus may be necessary to take care of their needs. In the first article of this two-part series, Moneycontrol looked at the institutional framework in place for their care as also their guardians’ responsibilities as per law. In this concluding part, we delve into how guardians can gain access to the investments and insurance polices of the orphaned kids' parents.
The COVID-19 pandemic has claimed many a precious life across the country, sparing no age-group. While children have been comparatively less affected even in the deadly second wave, its impact on some has been devastating. Close to 30,000 children across the country have lost one or both parents due to the disease so far, as per the National Commission for Protection of Child Rights (NCPCR) in India.
While institutional framework is in place to take care of such children, government agencies prefer entrusting such children’s custody to close relatives.
Guardianship, a court-regulated responsibility
If parents have executed a Will, their wishes will prevail. If not, then High Courts can appoint guardians as per the personal laws applicable to the child. “Typically, courts would appoint persons who have children of their own in the similar age group or persons who have exhibited a proximate relationship with the minor child and their deceased parents,” explains Rishabh Shroff, Partner, Cyril Amarchand Mangaldas.
Usually, grandparents or parents’ siblings come forward to look after such kids. If you have been appointed as guardian, you will be responsible for children’s well-being as also finances and assets until they turn 18. You cannot sell, gift or mortgage assets belonging to minor children without seeking the court’s nod. “A guardian is required to furnish an inventory of movable and immovable assets and money to the court (if applicable), as directed. In case of failure to take reasonable steps towards proper care and protection of the child’s finances or property, the guardianship would be terminated by the court,” explains Shroff.
First stop: bank accounts
Before you, as the guardian, initiate other financial transactions, you need to ensure that the children, through you, gain access to their parents’ bank accounts. If parents did name children as nominees, you can send an application to the respective banks and manage the accounts till children attain majority. “In case the minor children have not been appointed as nominees, the guardian can, on their behalf, produce proof such as death certificates, proof of appointment of guardian (that is, court order) and proof of identity of the minor and the guardian (Aadhaar card, passport, etc). Thereafter, the monies may stand transferred to the legal heirs (that is, minor children represented by their guardian),” explains Shroff. Access to bank accounts will also give you a snapshot of the financial position – investments as well as loans.
Stake a claim to the life insurance proceeds
Usually, claim settlement process begins after the policyholders’ surviving spouses reach out to the life insurer. But in cases like these, it is unlikely that children will be aware of the policy’s existence. “Since the beneficiary nominee (spouse in these cases) is also not alive, the title will become open. In such situations, the legal heir of the deceased life assured has to be established by obtaining a succession certificate from appropriate court of law and claim can be paid only on production of the same. If the Class I legal heir happens to be a minor, a legal guardian is also required to protect the interests of the minor,” explains Anand Pejawar, President, Operations, IT & International Business, SBI Life Insurance.
Spouses might have access to the policyholder’s documents, but how should guardians go about making a claim? “The guardians in charge of minor nominees have to initiate the claims process. Now, it is possible that many may not be aware of the life insurance policies the deceased parents may have purchased to ensure children's financial security. But if the nominees do not inform life insurers, such cases come to our notice only when we make follow-up calls for renewals,” explains Niraj Shah, chief financial officer, HDFC Life Insurance. You can physically check the documents in the house or SMSes and emails if you have the access, to ascertain policy details.
You will also need parents’ death certificates and legal guardianship certificate from a court. “The claim amount will be paid to the account of the minor through the legal guardian or as directed by a court,” says Pejawar. The amended Insurance Act, 2015 has created a new category termed ‘beneficial nominees’. If parents, spouse or children of policyholder are nominated in the policy, their rights will supersede that of legal heirs, making the process smoother.
Mutual funds
In the case of life insurance policies, where premium payment is a recurring transaction, there is a chance you will discover the policy details when the insurers call at the time of renewal. But this is not the case with mutual funds and other investments. “Usually, people stumble upon such documents when they scour the cupboards at home. You can also ask the children if they are aware of any mutual fund investments or bank accounts being discussed at home,” says an official at a childcare NGO who did not wish to be named. If you have access to their mailboxes, you can look for systematic investment plan (SIP) debit alerts or emails from fundhouses.
Like other assets, the children can inherit their parents’ mutual fund investments in line with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. “An appointed guardian can claim the parents’ funds on behalf of the minor. This can be achieved by making a written application along with relevant documentation, which could vary depending on the internal policies of the concerned depository to initiate the process,” says Shroff.
Like other assets, the investment will be transferred in the children’s name, with guardians acting as custodians till the children attain majority. “You will need to obtain a legal heir certificate, parents’ death certificate and PAN card details to complete the process,” says Vinayak Savanur, Founder, Sukhanidhi Investment Advisors.