Recently, we noticed one of our clients had not made any new direct equity or mutual fund investments for a long time, so we at Rurash decided to check up on him. To our surprise, we found that the client had died sometime back, and his wife had no knowledge of his wealth invested in stocks and other investment vehicles. The amount had grown considerably. The client’s wife broke down as the family was going through financial difficulties, and the money would help them sail through the difficult times.
Even another client had forgotten about his investments in bonds, which he had bought fifteen years ago. He realized it only when he heard about another investor getting a reasonable price for the bonds that year.
But not everyone realizes their investments or is not as lucky as much. About Rs, 22,000 crore of investor money is still unclaimed by insurance companies, mutual funds, corporate houses, banks, and ESPFs.Investors made investments they never recouped.
This is a problem almost every investor faces. The majority of households have a dormant bank account, a long-forgotten insurance policy, or an expired dividend check.
Most investors experience this problem. Every home has bank accounts that aren’t being used; insurance policies that have been forgotten, and dividend checks that have already been cashed. Let’s see how we can reclaim those forgotten investments. Life insurance policies. There is a significant black hole in the wealth of investors as a result of this. There are roughly Rs 1,724 crores of unclaimed funds within the life insurance sector.
Unclaimed benefits worth Rs 1,500 crore have been accrued by private-sector insurance companies, which started operations only 11 years ago.
There are different kinds of claims for unclaimed policy benefits, such as benefits that were paid out to policyholders but were not cashed in. At Rs 218 crore, LIC stands third among companies that have been operating for more than 60 years.
According to companies, they hold unclaimed funds for a considerable period of time. IRDA regulations do not allow insurers to write off this money for a long period of time. Currently, “long” has not been defined. However, you won’t get more than the due amount because it won’t earn any interest. It’s best to file your death claim right away. In the case of a policyholder’s death, a late claim makes people wonder if there was foul play or fraud. The insurance company will look into what happened to find out what caused the death and how it happened. As a result, it becomes a sticky situation. Making a claim on time is in everyone’s best interest.
It’s important to tell your family about the policies you’ve bought and keep track of them so that your insurance investment is safe. Upon death, the nominee will be able to claim the amount without experiencing any difficulties. If the nominee isn’t on the insurance document or hasn’t been told about it, problems could happen.
Bank account and Deposits
It is estimated that more than Rs 1,700 crore is lying dormant in accounts and unclaimed bank deposits across India. Among the SBI and its associate banks alone, there are unclaimed deposits of Rs 279.7 crore. The Reserve Bank of India has asked banks to think about starting a special campaign to find customers or legal heirs of accounts that are no longer being used.
As of July 1, 2012, all banks will have to put the names and addresses of customers with unclaimed deposits on their websites. In terms of how banks should handle this money, the RBI is very clear. The interest rate of a savings bank will be applied to the money from maturing FDs that has not been claimed. Savings bank accounts also get interested every month, whether or not the accounts are being used.
Don’t despair if you have also forgotten your fixed deposit. Your money can be returned to you along with interest. In some cases, banks offer customers an interest rate greater than that offered by savings banks. SBI says that if an investor wants to take out the money from a forgotten FD at maturity, he will get the savings bank rate at that time. If he wants to reinvest the money, he will get the FD rate that was in effect at the time.
It is open for seven years from the date of maturity. The money is placed in the unclaimed account if the investor cannot be traced during this period. In the same way, if you don’t use your savings account for two years, it stops working.
Stock Investments and dividends
It is possible that hundreds or even thousands of investors do not know that they have inherited shares. Many people may have forgotten about the stocks they purchased some time ago.
When investors find shares by accident, they often forget about dividends that were paid out in the past. In order to distribute dividends to shareholders, companies send dividend warrants (or cheques). The money is transferred to a different account if the investor does not encash it within 30 days. Dividends that have not been claimed are noted in the annual report.
When the seven-year time limit is up, the money in this account goes to the Investor Education and Protection Fund. As a result, if you missed out on dividends that were declared on your stocks a long time ago, there is still hope of recovering them. You can always reach out to our relationship manager for assistance as Rurash has experts, especially for situations where you would need your shares to be recovered or converted from physical shares to dematerialized ones, so you can still use the trading potential of the stocks you inherited in physical form.
Income Tax refunds
The Income Tax Department continues to issue refund warrants in the physical form even though refunds are now sent directly to your bank account. The income tax staff has a reputation for purposely delaying refunds so that they can get as much money as possible from the taxpayer.
Please note that the refund will not earn any interest after the check has been issued. The interest earned during the period is lost if the check does not reach you for 1-2 years, and you have to spend another couple of months revalidate it. Taxation can get confusing sometimes and may require help and guidance from professionals. Rurash will always be there to help you with a team of tax professionals and experts to make your tax filing and refund claim a breeze.
Mutual Fund Investments
Since the turn of the century, the mutual fund landscape has undergone significant changes. As a result of the growth of new fund houses, older fund houses have merged, and some have even closed their doors. As an example, the Canbank Mutual Fund has been renamed the Canara Robeco Mutual Fund. In 2008, the ABN Amro Mutual Fund became Fortis Mutual Fund, which was then acquired by BNP Paribas Mutual Fund in 2010. Even individual schemes have merged or been renamed.
To avoid losing money in the maze of new names, investors should keep track of these changes. It is important that the new fund house be informed of your address, contact information, and bank account information as soon as possible. For example, there are many investors who are still holding units of the Alliance New Millennium Fund bought in 1999 at Rs 10.
It is likely that you will not have any knowledge of the dividends that were paid on your mutual fund investments if you do not recall them. Almost 340 crores in unpaid dividends and 113 crores in unclaimed funds are held by mutual funds. Changes in the address or bank account information can cause dividend checks to be overlooked. When many schemes were introduced in the early 1990s, there was no system of ECS
Unclaimed dividends are held by mutual funds for a period of three months. Upon becoming stale, the dividend check is re-invested in the money market.
How to avoid the aforementioned scenarios.
Don’t let your investments go unclaimed by following these tips.
Keep a record of it:
Keep a record of all your investments in a file. Make a note of all the relevant account and folio numbers.
Keep your family updated:
Keep your spouse and other family members informed of all financial transactions. Thus, you will ensure that your family will have access to your investments even if you should pass away.
Assign a nominee:
Ensure that a nominee is named in all financial investments. As a result, the funds are transferred without delay to the nominee.
Regularly remind yourself of the same:
Establish a reminder system for premium payments and maturity dates of investments. You may do this by visiting a variety of websites, using your PC, or even using your mobile phone.
Opt for ECS:
You may give ECS mandates for the direct crediting of dividends, interest payments, and maturity proceeds to your bank account.
Reduce the clutter:
You should close down any bank accounts you are not using, transfer your PF to the new employer, and refrain from having too many mutual funds or insurance policies. The fewer the investments, the easier it is to keep track of them.
It is only human to forget, but to remember and reclaim what’s yours is divine. People often tend to lose hope if they remember a long-lost investment of theirs.
We at Rurash help bring those investments back to you and help you plan out your future investments. Rurash has teams of experts to assist you in managing your past, present, and future investments; developing a bespoke strategy to capitalize on interesting opportunities in direct equity investments, fixed income investments, and unlisted and pre-IPO shares; and, if necessary, assisting you in obtaining instant funds by using your shares as collateral.
Rurash Financials is one of India’s investment management firms, providing financial solutions to augment the client’s wealth and build a legacy.