Investments can play a vital role in reshaping the future of an individual; it can help you save funds for many things in the future. There are many sources of investment in the market, while these investment sources might not guarantee a secure return. To make your investments fruitful, you need to invest in sources that offer investment and return guarantee. One such investment sources in India is a Fixed deposit.
FD is one of the most popular investment schemes in India, most of the Indian investors are young and amateur when they start investing. Hence, investing in a risky source might make them lose their money, so FDs might be an ideal option for them. FD returns are simple, the amount you earn from your FD investment is dependent on the interest rate offered by the lender, and those returns are given to the investor at the maturity of his FD account. There are times when the investor might not be present to collect the amount and does not want to renew the FD after the maturity. In such a situation, the investor’s funds can be collected by his investment beneficiaries.
What is a beneficiary?
A beneficiary is a person who operates the investors’ funds or investment accounts in the absence of the investor. The investor can choose anyone as a beneficiary depending on the relationship between him and the investor.
How to choose a beneficiary for your investments?
When it comes to choosing a beneficiary, the basic idea is to choose a person whose needs you want to be fulfilled in your absence. This can be understood better with an example:
Rakesh is a 48-year-old sales executive and has two children. Rakesh and his wife are very eager to get their daughter married. Their younger daughter is studying is in the final year of her college and has plans to study abroad for further education. Rakesh also takes care of his elderly parents and provides them with a monthly income.
Rakesh has been a good family man and makes sure that the needs of his family members are taken care of very well. Rakesh has been getting emails and reminders lately, to nominate investment beneficiaries for his Fixed Deposit accounts. Since Rakesh has such a big family choosing the right beneficiary for his FDs can be a hard choice. So what should he consider while choosing a beneficiary for his FD returns?
When investing in FDs, Rakesh should make sure that the amount of money he is saving for his financial endeavours would be available to the right people at the right time during his absence. Since Rakesh has a daughter, who will be in abroad at that time, also his wife who will be living alone in his absence and finally his parents who are dependent on him for their monthly expenses.
The best way for Rakesh to choose beneficiaries for his FD account is to divide the number of family members into two groups:
- Joint account holder: The person who will be the in charge of his account jointly and will have the right to withdraw or renew the FD account during his absence.
- Beneficiaries and nominees: The people who get the returns of his FD account in the absence of Rakesh and the joint account holder.
He can choose his wife or one of his parent as a joint account holder and his daughter who is in abroad as a beneficiary.
It is important that you choose your beneficiary and joint account operator for your FD account. You must also keep a record of the FD or FDs that you hold; you should know about the maturity date, return date and the financial institution in which you have invested for your FD account.