We as individuals assume a lot of things in our lives like we assume whatever we have will ultimately belong to our own people and in case of our death, our assets will automatically be transferred to their names. But unfortunately, this is not true. There are a lot of intricacies and anomalies in the transfer process. If you live under the impression that writing a nominee’s name in your financial products will let them claim your money after you, then wake up before it is too late. Things always don’t happen this way. This article will let you know the relevance of making nominees for various financial products.
Who is a nominee?
Most of the people often live in a misconception that whatever they have earned, saved and invested will go to their spouse and children, then why there is a need to make a nominee. These people need to understand that the nominee is a mere trustee. He is not owner of your assets and legally can not exercise any right on the assets for which he/ she is a nominee. You can better consider his position as that of a caretaker for the asset concerned. After your death, he will be legally bound to transfer the money/ asset to your legal heirs. As per section 39 of Insurance Act, you can appoint a person as nominee who may or may not be your legal heir.
Now, the question that arises in mind is “what is the difference between nominee and legal heir”. A legal heir is the person whose name is mentioned in your will and in case of absence of will, succession laws will determine who the actual legal heir is.
Why to appoint a nominee?
Assume a situation, you have taken up a life insurance plan and during the term, you unfortunately expired. While taking up the policy, you advertently or inadvertently skipped to mention the nominee’s name and relation with you. Now, since you are not there in the world, your legal heirs will have to go through a lot of hassles to claim your assets. For each asset, they will have to make multiple visits to various offices, court, etc. They will be required to produce various certificates like your death certificate, succession certificate, probate of will, proof of relation with you, etc. to claim your assets. More the number of financial assets more will be the hassles for them.
If you would have appointed a nominee, then the whole process would have been simplified. Being your nominee, the person will have a right to collect your money from the concerned offices and the companies will not be in a position to deny this transfer. Now, the matter will be between your nominee and your legal heirs.
Let us have a look at nominations in different financial products.
Nomination in Life Insurance
You can choose multiple nominees for your life insurance policy but the first choice should always be your family members. However if you want to appoint a non-family member as your nominee, then you will be required to give a proof to the insurance company related to the insurable interest for this person.
Nomination in Mutual Funds
Mutual funds allow appointment of maximum three nominees. A minor can also be appointed as nominee but this will require the information of his guardian as well. In the event of your death, all the units will be transferred on the name of your nominee/s. During your lifetime, if you have added some units to your existing units of mutual funds, then after you your nominee will be entitled to the added units as well.
Nomination in Shares
Unlike other financial products, if the shareholder dies intestate, that is without writing a will and has appointed a nominee for his shares, then his nominee will be the ultimate owner of the shares not the legal heirs. However, if he has written a will, then the shares will be transferred on the name of the person mentioned and not in not on the name of the nominee.
Nomination in PPF
A person can appoint one nominee in case of PPF. However, if a person has not appointed any nominee and dies intestate, then in order to claim his money, his legal heirs can submit form G to the Accounts Office along with necessary documents. In case, the amount is more than one lakh then succession certificate will also be required.
Nomination in Bank Accounts
You can choose a nominee for savings bank account, current account, fixed deposit account and recurring deposit account. However, appointment of a nominee does not always give him the right to claim as it depends on the will and in absence of will it depends on the succession certificate.
