NRI Wealth Expert

Category: Financial Foundation

  • A Comprehensive Guide to Making a Will for NRIs

    Creating a will is one of the most responsible decisions you can make, especially if you have dependents. However, many Indians assume that wills are only for the ultra-wealthy or elderly, which often leads to neglecting this important task. The rules in your host country may differ from those in India, so it’s crucial to consider making a will to protect your loved ones.

    A will is a deeply personal document, and there are no one-size-fits-all solutions. Based on my experience in creating a will, I will provide some useful pointers. While this guide is primarily focused on England, many of these points may apply to other countries as well.

    The Importance of Having a Will: Key Scenarios in England

    Without a will, your loved ones may face significant challenges. Let’s explore some scenarios in England to understand the consequences of not having a will:

    1. What happens to children if both parents pass away without a will?
      • Children will be taken into care until the court appoints a guardian. They will inherit your assets when they turn 18, but those assets will be managed by a trustee until that time. However, they might not be mature enough to handle a large sum of money at such a young age.
    2. What happens to assets if there is no will?
      • The surviving spouse will inherit the first £325,000 of the estate, plus half of the remaining estate. The other half will be divided equally among biological and adopted children.
    3. What happens to assets if both parents and children pass away without a will?
      • If no relatives are available, the assets will go to the Crown Estate.

    If these outcomes are not aligned with your wishes for your dependents and hard-earned money, it’s essential to create a will. It’s not a difficult process, but there are a few key questions you need to address.

    Key Questions When Creating a Will

    1. Guardians for Children

    This is often the most difficult decision for NRIs, especially if you don’t have family or relatives living in your host country. You might want to appoint guardians from your family in another country. In this case, it’s a good idea to have interim guardians in your host country until the appointed guardians can take custody. Choose someone you and your children trust.

    2. Executor

    The executor is the person who will carry out your wishes as specified in your will. They will handle financial matters by contacting financial institutions and government agencies. This could be your spouse or a professional company. Many professional companies in the UK offer will execution and trust management services. It’s wise to appoint a backup executor in case your spouse is unwilling or unable to fulfill the role. The executor should ideally reside in your host country, as managing financial institutions and organizations from abroad can be challenging.

    3. Trustee

    If you allocate some of your assets into a trust, the trustee becomes the legal owner of those assets. They will manage the assets according to the terms outlined in your will. Trustees are typically individuals you trust, such as family members, or people who will look after the assets while your children are young.

    4. Reserve Beneficiaries

    If there are no living relatives to inherit your estate, it will go to the Crown Estate. You can designate reserve beneficiaries in your will in case something happens to your immediate family. These could be relatives in your host country or other countries.

    5. Funeral Wishes

    You can specify your funeral preferences in your will. These might include:

    • Organ donation wishes
    • Religious rituals or specific customs

    The Process of Creating a Will

    It is possible to write a simple will yourself, there is no legal requirement in England to hire a solicitor for this. However, mistakes in a DIY will can invalidate it. To avoid this risk, it’s a good idea to consult a will writer to ensure your will is correct and legally valid. You can find a will writer in your area through references or services like the Institute of Professional Willwriters (IPW).

    Once you’ve chosen a will writer, you’ll need to decide on the type of will that best suits your needs. They will typically offer a few options:

    1. Basic Will
      This includes guardianship of children, asset distribution for dependents, funeral wishes, and other essentials. If you have young children, they will inherit your assets when they turn 18. A basic will is ideal if you’re young, have dependents, and don’t have many complex assets. Many online will-writing services offer affordable options and can provide a review or full service.
    2. Trust-Based Will
      In addition to everything covered in a basic will, a trust-based will allows you to place assets into trusts. This gives you more control over how and when assets are distributed—such as at different life stages rather than all at once when your children turn 18. This type of will is suitable for those with young children, significant assets, or complex asset distribution needs.
    3. Estate Planning
      This service includes inheritance tax planning along with the creation of your will. It’s typically more expensive and usually best for older individuals, as inheritance tax laws change over time, and early planning may no longer be valid in the future.

    Trusts: What You Need to Know

    Trusts are legal vehicles that allow you to manage your assets according to your wishes. They are especially useful if you want to control how and when your children access their inheritance. Trusts are also important for overall estate planning. Given that tax rules and legislation surrounding trusts are subject to change, it’s advisable to consult an estate planning expert to understand if a trust is appropriate for your situation.

    Storing Your Will

    It’s crucial to store your will securely and inform your executors and dependents about its location. You can keep it at home, but ensure it’s stored safely to avoid damage or loss. Many will writers offer a storage facility for a fee, and they will provide you with a reference copy.

    Alternatively, you can store your will with the government’s HM Courts and Tribunals Service (HMCTS) for a small fee. When stored with HMCTS, you’ll receive a certificate, which can be shared with executors.

    Review and Update Your Will Regularly

    You should review your will every five years or after significant life events. Common triggers for updating your will include:

    • Changes in the guardian, executor, or trustee situation
    • Changes in relationships or dependents
    • Moving house

    Covering Indian Assets in Your Will

    A common question is whether a UK-based will can cover Indian assets. While Indian courts do accept foreign wills once they’ve been deposited and proven in a foreign court, this may require additional documentation and proof. Given the complexity of the Indian legal system, I recommend creating a separate will for your assets in India. This will make it easier for your executors and dependents to manage your estate.

  • Key Financial Information Checklist

    This post is a continuation of our Financial Foundation steps. It’s crucial to keep all your financial information organized so that your loved ones can step in during an emergency.

    In previous generations, financial assets were simpler to manage. People had fewer accounts, and most assets had paper trails, making it easy to gather information. However, in today’s digital age, online banking and statements have made managing finances more convenient, but also more complex. Many individuals now have multiple accounts across various platforms. Without proper record-keeping and family involvement, your loved ones may have no idea what assets you hold. This makes it more important than ever to keep your financial information organized.

    A well-organized financial record will help your family piece together a complete financial picture if they need to take charge during unexpected events.

    What Information to Capture

    1. All bank accounts
    2. All investment accounts
    3. All insurance details
    4. All real estate information
    5. All digital asset details (e.g., domains, email, social media accounts)
    6. Other asset details
    7. All loans or borrowing information
    8. Important IDs and documents (including storage info)
    9. Key contacts (e.g., friends, financial advisors, will solicitors)

    Best Practices for Capturing Financial Information

    Storage: Since this is sensitive financial information, it’s essential to protect it from identity theft or fraud. Avoid storing it in cloud storage without encryption. Instead, consider keeping it in a physical copy or a secure diary. Make sure your loved ones know where to find this information when needed.

    Level of Detail: The goal is to help your family build a full picture of your assets and financial situation in case they need to take over. This document should not include sensitive details like login IDs or passwords. A person with power of attorney can access accounts by directly contacting the bank or institution, without needing your login information.

    Identifiable Information: To reduce the risk of fraud, avoid including personal identifiers like Social Security numbers or ID number. Use general terms like “self,” “spouse,” “daughter,” or “son” when referencing accounts. You can also note the location of important documents instead of listing serial numbers of document.

    Digital Legacy: Much of our life is now stored digitally, and it’s wise to set up a plan for your family to access these accounts. For a helpful guide on how to do this, check out this resource.

    Primary Email Access: Sharing access to your primary email with someone you trust can be very helpful. Your email can serve as a tool to reset passwords and access important digital statements.

    Simplify: Once you’ve gathered all your information, take the time to review and simplify your financial life. Consider the following:

    • Can you close any unnecessary accounts?
    • Can you consolidate any accounts to make management easier?
    • Are the nominee details on your accounts still up to date?
    • Is your insurance coverage still adequate for your current life stage?

    Example Template to Store Key Financial Information

    You can download this template to store your key financial details. Create a copy of the file, update it regularly, and set an annual reminder to review and revise the information. It’s a good idea to create a new version of the sheet each year to keep track of any changes over time.

    Download Template from this link: KeyFinancialInformationChecklist

  • Building the Financial Foundations: 10 Steps for NRIs

    In this post, I’ll focus on establishing the essential building blocks for your financial journey. While these steps may seem mundane compared to the excitement of finding investments and tracking returns, they are crucial for laying a solid foundation on which to build a strong financial strategy.

    1. Set Up an Emergency Fund

    Setting up an emergency fund is one of the most common pieces of advice in financial blogs. However, for NRIs, it’s especially important. Many of us have family and responsibilities back home. A well-funded emergency reserve allows us to be with our loved ones in times of need, without worrying about finances. Not being available to family when they need us is a source of guilt for many NRIs. An emergency fund makes it easier to take time off without stressing over money.

    Additionally, an emergency fund can help you navigate job-related situations like redundancies or toxic work environments. In many Western countries, job transitions can take months. For example, in the UK, it can easily take six months from applying to join a new role. Having a sufficient emergency fund in place can make these transitions smoother.

    Aim to save 6-12 months of living expenses. This should be kept in easily accessible, tax-efficient non-equity products. In the UK, consider using an ISA (if you have spare allowance), a savings account (which is taxed on interest), or Premium Bonds (which are tax-free). If you expect more expenses in India, you might want to split your emergency fund between India and your current home country. Though with services like Wise, transferring funds to India is fast and simple reducing need for maintaining funds in India. NRIs might face compliance issues with Indian accounts/cards limiting account access in time of need.

    2. Review Your Life Insurance Requirements

    Many of us have life insurance through our employers. In the UK, it’s common to receive cover for four times your annual salary. However, it’s important to remember that if you switch jobs or are between roles, you may no longer have life insurance coverage. To ensure you’re fully protected, consider getting a personal life insurance policy.

    Calculate your life insurance needs by factoring in your liabilities (like a mortgage or dependents) and subtracting your existing assets. Life insurance is typically cheaper when you’re younger, but premiums increase as you age. Consider keeping your coverage until retirement age (65).

    Also, it’s wise to put your life insurance policy in a trust for ease of access for your loved ones. Most insurance companies offer this service at no extra cost, and it’s a simple process.

    3. Review Critical Illness Insurance

    Critical illness insurance provides a lump sum payout if you’re diagnosed with a serious illness, helping cover alternative treatments or other expenses. While this is a valuable policy, it’s also expensive because more people are likely to make claims. In the UK, NHS covers critical illness treatment, so you might want to evaluate whether the cost of critical illness insurance is justified, or if you can self-insure by setting aside funds.

    If you’re more concerned about maintaining income while unable to work due to illness, consider income protection insurance instead.

    4. Review Income Protection Insurance

    Income protection insurance pays a portion of your income (usually up to 80%) if you’re unable to work due to illness or injury. These policies come with various options, so it’s best to consult a broker to ensure you’re getting the best deal. I’ve found that online comparison sites often offer limited options.

    When buying income protection insurance, choose “Own Profession” coverage, which ensures you’re protected if you’re unable to perform your current job, rather than just any job. Also, opt for coverage until you either recover or reach retirement age. To reduce premiums, consider deferring the benefits—starting payouts 6-12 months after you’re unable to work.

    5. Review Medical Insurance

    While the NHS provides healthcare in the UK, waiting times for non-life-threatening treatments can be long, potentially impacting your quality of life. If you value faster treatment, you might consider private medical insurance, which is often provided by employers in the UK.

    In India, there are specialized medical insurance products for NRIs. However, traveling to India for treatment can be challenging due to the flight duration and extended post-treatment stays. That said, for non-critical procedures, Indian medical insurance can still be a good, affordable option.

    6. Create a Will If You Have Dependents

    Having a will is one of the most responsible actions an NRI with dependents can take. In many countries, including India, creating a will is often overlooked, especially by younger individuals. But in your host country, inheritance laws and child custody rules can be very different.

    If you have dependents, consider the following questions:

    • Who will look after your children if something happens to both parents? Are you comfortable with state-provided foster care, or would you prefer a relative to raise them?
    • Do you want your assets to be given to your children as soon as they turn 18, or would you prefer a structured, managed income stream to prevent them from mismanaging a lump sum?

    A will doesn’t have to be expensive or complicated. Some charities offer free will-writing services in exchange for a donation, but it’s best to use a professional service to ensure your wishes are properly documented.

    7. Create a Lasting Power of Attorney (LPA)

    If an accident or unforeseen event leaves you incapable of making decisions, your family may not be able to access your funds or make important decisions on your behalf. A Lasting Power of Attorney (LPA) allows a trusted person to manage your affairs if you’re unable to do so.

    In the UK, there are two types of LPAs: one for financial matters and another for health-related matters. These are registered with the Office of Public Guardians and should be prepared while you’re still capable of making decisions.

    8. Prepare a Key Information List and Share It with Loved Ones

    Having the right protections in place is essential, but sharing this information with your loved ones is equally important. In an emergency, your family will need access to vital details like account information, insurance policies, your will, and LPA.

    Create a comprehensive list of key information and share it with trusted family members. Be sure to update this list at least once a year (for example, during the Christmas break).

    9. Involve Your Partner in Financial Planning

    Financial planning shouldn’t be a solo task. Ideally, both partners should be involved in managing finances and investments. Unfortunately, many households have just one person taking on this responsibility. Involving your partner in financial discussions ensures they can support you in emergencies and have a clear understanding of the household finances.

    10. Allocate an Annual Budget for Experiences, Hobbies, and Your Bucket List

    Many Indians are natural savers, but it’s also important to allocate part of your budget for personal experiences, hobbies, and bucket list items. Without this balance, you might reach old age with significant savings but regret not having lived fully. Prioritize experiences that you want to enjoy while you’re still able to, as some things are best done when you’re younger.

    By following these steps, NRIs can build a strong financial foundation that provides security and peace of mind. However, keep in mind that this is an ongoing process. Regularly review and adjust your plans as your life circumstances and financial goals evolve.