The Reserve Bank of India (RBI) will soon launch a centralised portal that will help bank depositors or their beneficiaries to search and get back the unclaimed deposits after due verification. About Rs 35,000 crore of unclaimed amounts from 10.24 crore accounts (as on February 2023) were transferred by public sector banks to the central bank. Unclaimed deposits pile up with banks, insurance companies, asset management companies, etc., as individuals often do not appoint

a nominee to handle their account after their death or the legal

heirs are not aware of the various investments done.

To manage your finances and ensure that your family gets back your hard-earned money, it is crucial to record nomination, update it whenever required and write a will. A nominee is not considered as a legal heir and is only treated as a caretaker of the assets. Nominations are made to ensure that the deceased’s assets are protected until the legal heirs take the right steps to take over them.

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Nominee to legal heir

A nominee is a trustee who would be the caretaker of the financial assets and will transfer the money to the legal heir of the deceased person. A legal heir is a person who is entitled to succeed to the property of a deceased person under a will or as per the succession laws.

Vishnu Chundi, founder and CEO, AasaanWill, says a nominee should be one of the legal heirs. Even in the presence of a nomination, an individual should write a will as it is the supreme document that specifies the exact intentions of the deceased. “Asset distribution should be specified in the will to ensure that the legal heirs get their inheritance. Legally, an individual can appoint anyone as a nominee. However, it is advisable to nominate the nominee as a legal heir while writing a will to avoid any disputes over the inheritance,” he says.

It is important to mention the nominee as a legal heir, while making the nomination. But, this is not sufficient to ensure that the same person will get a share of the assets by simply being a nominee.

For example, a person may have appointed his wife as a nominee for various investments making his wife one of his legal heirs as well as a nominee. With his death, the person leaves behind family members (and legal heirs) such as his mother, two sons, one daughter and wife. In fact, the deceased person had assumed that his wife, being the nominee, will get everything smoothly. But, according to the law, his other legal heirs, i.e., his mother and three children also have equal rights over his assets. In such a case everything will have to be equally distributed among his five legal heirs since he had no will.

Appointing a nominee

While individuals can appoint spouse, parents and even a distant relative and friend as a nominee, they must note that for every financial product, the eligibility of nomination differs. For example, in the case of Employees’ Provident Fund the nominee has to be a family member as the money will go directly to the nominee. In case the nominee is a minor, then the individual will have to give details of the guardian.

In case of insurance policies, the rules of beneficial nominee apply. Policyholders can put a beneficial nominee as spouse, children or even parents and in case of death of the policyholder, the proceeds will go directly to the beneficial nominee. In case a beneficial nominee is not mentioned, then the nominee will be considered as just a custodian and the proceeds will go to the legal heir. In most investments like bank deposits or National Pension System, an individual can opt for multiple nominees and define the share to be distributed to each of them.

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“It is important to update the nominee as and when the relationship dynamics and financial obligations evolve. For example, if one gets divorced or remarried and no longer wants to keep their ex-spouse as the nominee, there is a need for an update in the will,” says Chundi.

WHO GETS YOUR MONEY?

* A nominee is a trustee who would be the caretaker of the financial asset and will transfer the money to the legal heir of the deceased person

* A legal heir is a person who is entitled to succeed to the property of a deceased person under a will or as per the succession laws