‘What happens when I die’ is a concern occasionaly voiced by investors. Investments in p2p lending will be inherited like any other assets. The concern for the investor is how readily their beloved ones will be able to access the funds. I scanned the FAQs of several p2p lending marketplaces but this is not one of the topics addressed. I then reached out to the marketplaces asking for information.
Ratesetter, Assetz Capital and Estateguru pointed out that the procedures are very similar to those applied by other financial institutions.
Assetz Capital, after being notified about a death of an investor by the next of kin or a solicitor acting on behalf of the deceased estate will mark the account as deceased and suspend all marketing emails. The next step is requesting proof of death, most commonly provided in form of a death certificate and grant of probate. In the event that the decision taken is to liquidate the account then all account holdings are put up for sale. Any funds which can be released immediately are sent to the appropriate recipient and a monthly sweep of the account is carried out indefinitely until such time as all funds have been liquidated and released to the appropriate recipient.
Luke O’Mahoney of Ratesetter explained: ‘If an investor dies, we work with the next of kin to establish how they would like the account to be dealt with. Generally they would either use our Sellout function (effectively liquidating their investment) or they would allow the account to run down over time â€“ of course we assist the next of kin or executor with this process’.
Funding Circle CE answered: ‘If the account is transferred theÂ inheritance would need to be proven and the account would be manually transferred. The heir can then decide what to do with the portfolio.’
Martins Sulte, CEO of Mintos indicated that there are numerous different situations as the account is inherited according to the respective laws of the country where the investor resides.
In Estonia all matters of inheritence are usually dealt with by a notary office or a solicitor, says Aleksei Kurov of Estateguru. He describes ‘[the] notary or solicitor sends requests to different registers: Property Register, Companies House including all credit/finance institutions to clarify if the person in question had any obligations or deposit/investments accounts opened and what are obligations or funds are connected to these accounts. … When all heir/heirs are clearly identified and the amount of inheritance is also clarified then Notary Office is making a registry entry to an Inheritance Register. This entry will specify the list of heirs and their share of the inheritance. EstateGuru will have an information about the death and consequent inheritance procedures when we are contacted by Notary or Solicitors office. Then we will check with Inheritance Register (if the investor is from Estonia) or with according local institution to confirm this information. We will also seek independent confirmation from his Bank, which was used to transfer funds to our account. Any monetary pay-out or change the information of the account owner is possible only after we receive an official and apostilled confirmation from notary office, solicitors and/or double check this information with available local Inheritance Registry. If information we received is in local language, we will request that it is translated into English and apostilled. If we are satisfied with the identity confirmation and the legal rights heir/heirs then we will follow instructions from them, to make necessary changes on the account, close it or do the pay-out of available funds.Already invested funds will be repaid at the project maturity.’
PÃ¤rtel Tomberg CEO of Estonian marketplace Bondora offered a somewhat similar description of the process. He added: ‘Additionally based on the wishes of the heir(s) either the free balance shall be transferred to the heir(s) or invested again. Active investment (meaning where the loan is still valid) will be managed by the heir(s) (either they rundown or will be sold on secondary market). …’. Over the course of operations Bondora handled 5 inheritance cases so far. ‘ … Each inheritance case is different â€“ process itself can take only couple of months or even 2-3 years. During this time we are legally prohibited to grant access to anybody and we are not able to transfer free funds out from deceased account. We recommend … [to investors] to let your family, friends or notary know about your investments with us to make sure that your heir(s) get access to your assets.’
I also inquired whether it is a common occurence after the death of an investor that the heir(s) is/are unaware that the deceased had an account with the platform and whether that could pose problems.
Assetz Capital said that even if the next of kin are unaware of the account then since monies are sent Assetz Capital via bank transfer it would be relatively straight forward for the next of kin to see these payment in the bank statements which would alert them to the potential of an account held. Bondora pointed this out too.
Funding Circle explains: ‘With any investment, there is a risk that heirs will be unaware of an accountâ€™s existence. … . Itâ€™s also worth noting that itâ€™s increasingly easy to keep track of modern investments compared to some older (paper-based) investments: conducting an online search is easier than going through a lifetimeâ€™s worth of paperwork.’. Viventor and Mintos being relatively new platforms have not encountered such cases yet.
Only Assetz Capital mentioned that they have a process to do regular checks on dormant accounts that are in funds to ensure that lenders are aware of those funds.
I received many detailed answers from the queried platforms and have not been able to cite all of them here and I also shortened some of the process descriptions.Â I am confident that investors do not need to worry about their heirs accessing the funds.
Personally I wonder, if it would be good practise for marketplaces to contact those investors that have not logged in for a very long period (2 years?) and ask them to update/verifying their data. Failure to do so could then trigger a letter with the same request via postal mail.