You must have noticed that whenever you are filing a form related to your finances, whether it’s for company stock, fixed deposit, mutual fund, health or life insurance, or even opening a new bank account, you’ll notice a section that asks you to fill a ‘Nominee’. As this is usually an optional section, you are likely to leave it blank. However, this is done by many people due to the lack of knowledge of what ‘nominee’ means.
In this article, we’ll look to explain the importance of this ‘Nominee’ field so that you’ll think twice before leaving it blank henceforth.
Who is a Nominee?
A Nominee is that person who will receive the proceeds of your account in the grim scenario of your untimely death. While applying for investments, insurances, or bank applications, you have the option to name the person/people who will receive your holdings post your death.
Who can be a Nominee?
Typically, the nominees are assigned to anyone who is considered the first relatives of the candidate, which could be your parents, your children, your spouse, or your siblings. While it is not mandatory, nominees are assigned to family members and relatives so that they can continue holding on to the wealth or cash reserves. Many investments or insurances allow you to also have multiple nominees assigned in ratios to each of the nominees. If these ratios or percentages are not specified, it is assumed that you intended the investment to be shared equally.
Why should I nominate someone?
The scenario of your unfortunate demise (god forbid) will be a very painful event and experience for your family and close ones to cope with your loss. Adding to this, there may also linger a question mark on the security of the family finances and the means of survival for your family and close ones. To make this easier on your family, banks and financial institutions tend to have a simple standard process to settle death claims as long as the nominee(s) is/are mentioned in the account.
However, if there is no clear nomination present, the process of settling such a death claim will require plenty of documents, possibly including even a will or a court order. This can end up being a long and drawn-out process and would put your loved ones in more struggle, along with coping with an already emotionally painful situation.
However, the reality is that there are plenty of families that aren’t registered as nominees. Data from the Reserve Bank of India (RBI) shows thousands of crores of rupees worth of unclaimed assets and deposits across the country, in accounts where the deceased hadn’t filed nomination details on anybody’s name.
The reality is that it will only take a visit to your bank, insurance company, or mutual fund house to add a Nominee in a form that you are filling up anyway.
What are the rights of a nominee?
As far as the Indian judicial system is concerned, the rights of a legal heir, if any, supersedes the right of the nominee. For example, if you have written a registered Will in the name of your elder daughter, while you’ve declared your younger daughter as a nominee, your elder daughter will be declared as the claimant of your liquid assets as per the provisions of the Indian Succession Act, 1925. A nominee can only act as a trustee on behalf of the legal heir(s) holding any assets, cash reserves, or properties until the succession or inheritance has been confirmed by law. This, of course, is under the assumption that you and your family identify and are registered as Hindus by faith.
Even if the banks have decided to transfer the funds held in your account to the nominee, they are merely entitled to hold it on behalf of the legal heir.
However, you can also choose to not have a legal heir and only have nominees.
How to add a nominee?
It is not at all difficult to add a nominee to hold any of your assets. All that you are required to do is to walk up to your bank or mutual fund house and register the individual of your choice as a nominee. Nowadays, you can do that at the comfort of your home as well, using the online portals of banks or mutual fund houses. However, there are a few points to note while doing this nomination process.
- Ensure that you mention the correct full name, age, address, and how you are related to the nominee of your choice.
- Do not mention your nominees as "spouse" or "children". Ensure that you mention the correct full name.
- In case the nominee of your choice is still a minor, appoint a person who is over 18 years of age with his/her full name, age, address, and how he/she is related to the nominee.
How to change a nominee?
For whatever reason, if you decide to change the nominee of your assets, your property, or your insurance post your potential premature death, there is a high chance you can do it online as well. Apart from that, you may also be allowed to make a:-
- Change in the nominee’s name spelling
- Change in your relationship status with the nominee
- Change in the date of birth of the nominee
To do this, you will be required to submit a ‘nomination change form’ with your signature mentioning the name of the new nominee (or changes to the spelling), address, date of birth, and updated relationship status with the nominee. If the nominee is a minor, you will have to enter the details of the appointee as well i.e. the name of the appointee (or new appointee), date of birth, address, and relationship status with the nominee.
We have seen the data released by the Reserve Bank of India showing the thousands of crores of unclaimed wealth lying around in banks with no claimants. This is despite the fact that the sudden passing of the owners generally makes it more financially difficult for the family members, dealing with the grief while simultaneously fighting a long and drawn-out legal battle for the claims. This can be easily overcome by just mentioning the nominee details while filling the official forms.