Declaring a nominee in your investments goes a long way in ensuring a hassle-free asset transfer for your family members when you are not around. Yet, many continue to overlook this critical aspect of financial planning, potentially exposing their loved one to legal complications and also financial distress.
Understanding nomination
Nomination is a facility that allows an individual to appoint a person who can claim the proceeds of their investments or insurance policies in the event of his death. Notably, there is no cost associated with appointing a nominee and a nomination can be changed at any time.
“It is highly advisable to lodge nominations in respect of all assets for which this facility has been made available, for example, bank account, bank locker, demat account, mutual funds, flats in co-operative housing societies, provident fund accounts etc.,” said Shaishavi Kadakia, Partner, Cyril Amarchand Mangaldas.
“This is because, if there is a nominee, then after the death of the asset/account holder, the institution (such as the bank) will transfer the cash or assets to the nominee without insisting on production of documents such as probate, letters of administration or succession certificate,” she said.
Benefits of declaring a nominee
Effortless access: A nominated beneficiary can access the financial assets quickly and without legal complications. This is particularly crucial during challenging times when the family may need immediate financial support.
Financial security: Designating a nominee provides assurance to the beneficiary that they are the rightful recipient of the assets. This clarity eliminates uncertainties regarding asset distribution and helps maintain family harmony.
Asset protection: A valid nomination reduces the likelihood of disputes among legal heirs. Without a nominee, assets may become vulnerable to claims from creditors or contentious legal battles, further complicating the situation for grieving families.
Flexibility and control: Filing a nominee allows individuals to exercise control over their financial legacy. It is advisable to periodically review and update nominations, especially after significant life events such as marriage, divorce, or the birth of children.
Having a nominee greatly simplifies the process for collection of the deceased’s assets from institutions as well as saves on cost, effort and time.
“While appointing nominees, it is advisable to align nomination with the bequests in the individual’s Will so that there is no confusion or dispute between the nominee and legal heirs although courts have held that legally the legal heir’s rights supersede the nominee’s,” said Kadakia.
First Published: Aug 06 2024 | 5:35 PM IST
