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Estate Planning is not just Will creation

Why do I have to prepare the Will? Am I not too young to prepare the Will?  

We all think the same but is it really true? 

We can’t leave our loved ones without any security or protection when we are not there with them.

Will preparation is a meticulous task but has to be drafted considering the important aspects. We have come up with few pointer heads to help you with Will preparation.

Trust - Succession Planning determines which asset goes to whom post-death of the asset holder. It is possible to do this by creating Testamentary Trusts which is especially useful where the person has minor kids or successors with a disability to take care of.

Life insurance - Term Insurance is the best option to loom at while preparing a Will. Term insurance is beneficial for Will planning since it protects your loved ones from sudden income loss. Also, the proceeds are tax-free in the hands of the beneficiary.

Nomination - A nomination is a vital process in bank accounts, fixed deposits, insurance policies etc. The legal heirs would need to know what assets they are entitled to. It is easy to reckon and assign if Will consists of nomination for each asset.

Power of Attorney - Power of Attorney is given where the deceased person has not nominated or transferred an asset to a legal heir or successor. The person with designated Power of Authority can sign the legal documents like the return of income or bank account ownership etc.

These are just a few pointers to go ahead with. However, keep tuned in to have some more insights on personal finance planning.

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Handling finances is a little tricky! But not if you learn the tricks of the trade - Money Ratios. 

Money Ratios are like a torch on the foggy road, so they will teach you how to evaluate financial health.

What are Money Ratios?

Money Ratios refer to the financial perimeters which can be calculated based on the components of Personal Finances like debt, monthly expenditure etc.   

Let’s learn about Money Ratios

1 - Liquidity Ratio helps you evaluate the cash position so as to understand the capability of the individual to cover the monthly expenditure in case of unforeseen events. It is calculated as below  Liquidity Ratio = Cash / Monthly Expenditure Liquidity Ratio denotes how many months of income you have at disposal in case of contingency. Ideally, it is better to have a Liquidity Ratio of 5-7 for individuals who do not have a stable income.

2 - Solvency Ratio is helpful for those individuals who have debt (housing or otherwise) in their portfolio. The solvency ratio denotes whether the assets in your portfolio can pay off the debt liability. It is calculated as below  Solvency Ratio = Net worth / Total Assets  Net worth is calculated by deducting the liabilities from the assets. For e.g., if an individual has a loan of Rs.10 lakhs and has total assets of Rs. 20 lakhs including fixed deposits and real estate. In this case, Net Worth = 20 lakhs - 10 lakhs = 10 Lakhs. The solvency ratio will be 0.50 which means that assets can service the debts sufficiently.

3 - Debt to Income Ratio Debt to Income Ratio refers to Equal Monthly Instalments divided by monthly income. This denotes the individual’s ability to pay the monthly instalments of the debt with his monthly income. Debt to Income Ratio on the lower side is considered satisfactory by the lenders. The more the monthly income is, the lower is the Debt to Income Ratio.

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