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Accessing Investments and Assets ofIncapacitated Persons in India:Challenges and Solutions

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When a loved one becomes incapacitated, families struggle to access their investments and assets in India due tolegal complexities. Discover the proposed solutions, such as joint holdings, PoA, and Sebi’s recent suggestions, to ease the burden on families during these challenging times.

When the unthinkable happens – an accident, illness, or worse – families are left grappling with morethan just their grief. In India, a complex maze of legalities often stands between them and theincapacitated person’s investments and assets. This Kafkaesque reality is all too familiar for one family who had to turn to the courts to pay for medical expenses when the breadwinner fell into a coma.

A cautionary tale: The fight for financial access

Niranjan Vemulkar, co-founder of Yellow, a digital will-making platform, recounts the harrowing story of a family’s struggle to gain access to the accounts of their loved one. “The breadwinner had invested in various instruments – mutual funds, fixed deposits, and demat securities,” says Vemulkar. “When he fellinto a coma, the family needed those funds to cover his medical bills. But they couldn’t access the accounts without a court order.”

Sumit Agrawal, founder of Regstreet Law Advisors, points out that the lack of a comprehensive law for accessing the accounts of persons with disabilities often leads to convoluted legal battles. “There’s a need for clearer guidelines,” he says. “The current system can be both time-consuming and costly for families who are already dealing with a distressing situation.”

One proposed solution to ease the burden on families is the creation of joint holdings or a conditionalpower of attorney (PoA) that activates under specific circumstances. For real estate transactions,registration of the PoA would be mandatory. However, this approach also raises concerns aboutpotential fraud and misuse.

Sebi’s proposals: A step towards simplification?

In response to these challenges, the Securities and Exchange Board of India (Sebi) recently released aconsultation paper suggesting giving nominees of incapacitated people more power to transact ontheir behalf. If accepted, the proposals could allow nominees to conduct transactions without court guardianship if the owner retains the ‘capacity to contract,’ using a doctor’s certificate, in-person verification, thumb impression, and online credentials.

However, experts remain cautious about the potential for fraud and misuse. They recommend limitingthe scope of transactions a nominee can conduct to protect the interests of the investor and their legalheirs. Standardizing the process across financial entities and simplifying court guardianship are also keyconsiderations.

To address the challenges of court guardianship, one suggestion is to replace it with two medicalcertificates for verification. This approach could potentially streamline the process and alleviate theburden on families.