While dealing with an insurance company, I heard about a 28-year-old manager of the company who met with an accident and died on the spot. His widow had a 3-year-old kid and was also five months pregnant.

I met the young lady. She was in her twenties. One day, when chatting with her, she told me about the financial problems she faced after her husband's death.

He had three insurance policies, which had lapsed. These policies seemed to have been taken to meet his sales targets, hence not kept in force! What a shame! You take an insurance policy to keep it in place, not to meet sales targets.

He had an insurance policy where he had nominated his mother. His mother passed away and the nomination was not changed. On her husband's death, she had to complete a tedious legal formality, establish her right and only then did she receive the claim.

She also discovered that his sibling was the nominee on his Public Provident Fund. He never changed it after he got married. And, since the sibling was alive, she did not feel inclined to claim any of that money.

He had invested in a mutual fund, but had not put a nominee. Thankfully I could pull some strings and do away with some of the red tape, give a personal guarantee, show how genuine the case was and get her the money.

He had a credit card, on which he had borrowed money -- to give to a colleague (perhaps) and the credit card company was chasing her. She had no idea about what he did with the cash.

She is not alone. Stories abound of how breadwinners pass away and leave their dependents trying to sort out the financial mess of who gets what.

The 'love' he had for the family now sounded hollow to her. If you are a husband, father, son, wife, mother, daughter, please show your financial love. It is far, far better than all the red roses, birthday cards, Valentine's Day cards and gifts that you can shower.

Do not turn their grief into anger. Grief they can overcome, anger they burn. I have seen three cases of young deaths, where the grief is gone, the anger is still there!

The way out: either hold it jointly or if you can't do that, nominate someone.

Bank Accounts

Let's take the example of a bank account. Holding it jointly is convenient. In fact, the banking guidelines state a number of ways it can be held.

Either or Survivor

If one of them passes away, the entire money goes to the survivor. This is good if there are two joint account holders. Be very careful in such a case. A cousin lost all his money to a scheming wife who has now left with all his money! Just be careful. Taking care never harmed anybody. Ask a leading politician, sometimes you cannot trust your own brother.

Anyone or Survivor/s

If the account is held jointly in the names of three individuals. If two of them pass away, the survivor gets all the money.

Latter or Survivor

This is held in two names. The second named account holder operates the account and has full right over the entire amount. Only on the latter's death will the survivor step in and get the money.

Former or Survivor

Same as above. But, this time, the first named account holder operates the account. The survivor steps in only on the death of the former.

Public Provident Funds

If the investment is not held jointly, you could look at nomination. In simple lingo, a nomination is just a statement of who should get your money when you are not around.

A common investment, the Public Provident Fund (PPF), does not recognize a joint holder but only a nomination.

In the event of the holder's death, the nominee can withdraw the amount anytime. However, if not withdrawn, it would continue to earn tax-free interest till maturity. On maturity, the amount will be paid to the nominee. But once the account holder dies, no fresh deposits can be made into the PPF account.

Mutual funds

In the case of mutual funds, the nomination process differs from one Asset Management Company to another. Some AMCs give the choice of nomination in the application form itself. Others ask for a separate application form to be filled in.

Shares

As for shares, it is done through the demat account. When you open a demat account, you nominate a person to whom all the securities in the account will be passed on to.

Even if you are young and feel you don't have much, nominate someone for whatever you do have. Where money and investments are concerned, leave nothing to chance. Every situation is unique. What is not so unique is the need for nomination.

Like Nike says, Just do it!

Here are some points to note:

1. You don't have to nominate a family member. However your wife is the most sensible nomination, unless you have some very strong reasons. However you can nominate whomever you wish to.

2. Give complete details about the nominee (full name, date of birth, relationship with you, address) when you fill in the details. This helps to a any confusion in case there is a claimant with a similar name staking a claim.

This is particularly relevant in the case of a minor being nominated. Mention crucial details to establish the identity of the minor beyond all doubts and mention the name of the natural guardian and the nature of your relationship with the minor (or the minor's guardian). Do note, when you nominate a minor, you have to state a guardian too.

3. If the person you have nominated is no longer alive, change the nomination. If the nominee dies before you and you do not change the name and something happens to you, your legal heirs can claim the money.

Also, change the nomination if the situation changes. For instance, you might have nominated a parent to receive an insurance claim in the event of your death. But, once you are married, it may make sense to change the nominee to your spouse. Or, you might have a sibling nominated for an investment but, after marriage, you may want it to be your spouse or child.

4. If you are no longer in relationship with the person whom you have nominated change the nomination. This could be a divorce, remarriage, etc.

5. A client had bought a flat with a mortgage. When he took a mortgage insurance I suggested he nominate his mother, not his wife (he had been married for 6 months). Why? Because he had taken a personal loan from his mother's brother and his mother was obviously the one who would have been morally obliged to repay that loan.

The author, P V Subramanyam, is a financial domain trainer and can be contacted at pvsubramanyam@gmail.com.

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