A nominee is one who gets the right to claim the asset on the death of the owner and acts as a custodian of that property until it is handed over to its legal heirs
Did you know the nominee in an asset is not the same as a legal heir of that asset? Did you know being the nominee of an asset may not give you its ownership right after the original owner’s death? If you want to pass on your legacy to its right legal heir, appointing the desired nominee may not be enough. So, what should you do to ensure your intended nominees get your assets after your death? Here are some essential points that can help you out.
Why is nomination required?
Nomination is essential for the appointment of one or more people who can receive the asset as its custodian after the death of its original owner. The duty of the nominee is to act diligently in passing on the possession of the asset to its true beneficiary. Nomination is solicited in all types of investments such as mutual funds, FDs, stock investments, small savings accounts, bank accounts, and even in insurance products.
For example, if you have not mentioned the nominee details in your bank account, the bank will try to find out the legal heir after your death. Whenever a legal heir contacts the bank, they will demand a succession certificate or will/legal heir certificate to allow access to the amount lying in the bank account. In fact, as of March 2019, the money left unclaimed for 10 years in various bank accounts amounted to a whopping Rs 25,000 crore, according to RBI’s data on the Depositors Education and Awareness Fund.
Difference between a nominee and a legal heir
A nominee is one who gets the right to claim the asset on the death of the asset owner and acts as a custodian of that property until it is handed over to its legal heir(s). On the other hand, legal heirs are the people who succeed in the ownership of the property after the death of its original owner. The names of the legal heirs are mentioned in a will drawn by the asset’s original owner or as per the succession law. So, a nominee can also be a legal heir, provided his/her name is mentioned in the will or appointed by law in the absence of a will.
A nominee is entitled to get the assets only after the death of the owner. When investing in any financial product or opening a bank account, you should ensure that you fill in the nominee details. Never leave the nominee space blank. If you have forgotten to add the nominee detail in any of your bank accounts or investments, you can add it later by submitting the nomination form. You can also remove or add a nominee to your assets anytime through a nomination change or alteration request.
When writing the nominee details, clearly fill in the date of birth, relationship with the nominee, address, and other information. It’s recommended to check the nomination details from time to time and change the nomination as per the situation in the future. It’s not necessary to keep the same nominee in every investment. Depending on your requirement, you may choose different nominees for different assets; for example, you may have a different nominee in your FDs at banks and investments in mutual funds. You must, however, keep a record of the nominees which you have mentioned in various assets and investments.
Nomination in various types of assets
In a bank account, you can have a single nominee. In a joint account, you can have more than one nominee. A nominee can be anyone, for example, a family member, friend, or relative. In life insurance, multiple nominees can be included with their respective shares under the nomination. You have to register the nominee details in Demat and DP account for nomination in your stock investments.
Adding a nominee to your investments is a highly crucial step in financial planning. However, the nomination alone may not be sufficient for a clear transfer of legacy to the intended heir; as such you must also draw a will to avoid any kind of disputes in the future.
The writer is CEO, BankBazaar