THE IMPORTANCE OF A NOMINEE

You are filling up a form and suddenly you get into a section where you have to fill up the nominee’s details. You think of a nominee, know the name, but don’t know other details. Even if you know other details, you are not sure. What do you do? You skip the section for later or you just fill the bare minimum details ( usually the name) and relation and move to the next section. What happens after this? The form is filled and deposited. You do not bother to update the details of nominee later.

I am sure all of us have gone through this. We tend to ignore this, fill it somehow giving inadequate details, or simply skip. The general feeling is that death is not for us, at least for a couple of years. By that time, our investment will mature or we will redeem the investment. While we all hope for the best, our hope doesn’t obviate the uncertainties of life. NOMINEE DETAILS

Nominee details are an important part of any investment decision. Life is uncertain and you want to make sure that in case of death, someone whom you trust should act as trustee of the investment. Fill up all the details such as name, address, age, and other details required.

MEANING OF NOMINEE

The meaning of nominee, however, differs from investment to investment. We will take four major types of investment ( including insurance) and explain the concept. In some cases, nominee is just a trustee of the assets left by the owner. The nominee is not the legal heir of the asset but it may also be the legal heir of the asset. Take a case for example. Rajeev has two sons and he nominated his

‘ NOMINEE’ AND ‘ LEGAL HEIR’ ARE DIFFERENT CONCEPTS. READ THE DETAILS OR CONTACT THE LAWYER FOR CLARIFICATIONS

elder son as nominee for his investment. If Rajeev dies without leaving any will, his elder son will act as trustee of the investment and he cannot claim his right on the asset. The asset will still be divided equally between the sons. However, if Rajeev leaves a will saying his elder son will be the legal heir, then it is a different matter altogether.

INSURANCE

In the case of insurance, the nominee receives money after the death of the policy holder. Due to the very nature of insurance, the nominee must be the person who is dependent on the policy holder and needs support after the death of the policy holder. Hence, the nominee in this case must be a dependent like family members.

If the policy holder intends to nominate someone else, he or she has to show that the person is dependent on him and needs insurance. MUTUAL FUNDS

Mutual funds offer flexibility in naming nominees. You can name multiple nominees ( usually up to three) for your mutual fund investment. The nominee can be a minor too if the guardian name of the said minor is specified in the form.

After the death of the mutual fund owner, the fund units are transferred to the nominees’ accounts. The nominees are named at the folio level. Hence every nominee is associated with a folio number, which will be transferred to his name at the death of the investor. STOCKS

Nomination in stock investment works differently. In the case of stocks, the nominee becomes owner of the shares if there is no will left by the deceased. So even if the nominee is out of relation, he or she will own all shares after the death of the investor. PPF INVESTMENT

In the case of PPF, if the nominee is not mentioned, the legal heir gets at most ` 1 lakh after completing some formalities. To receive this amount, a succession certificate is required, which is a time consuming process. If the nominee is mentioned, the amount outstanding is payable to the person. BANK DEPOSITS

The nominee acts as trustee and not the owner of the money lying in the bank. The legal heirs are the real owner of the money after the death of the depositor.

First, many forms still mention nominee/ legal heir together which might be confusing. ‘ Nominee’ and ‘ legal heir’ have different meanings in legal terms. It is better to put your legal heir name as nominee to avoid any hassles after the death of the owner. Many of us take it for granted that the legal heir will naturally be entitled to get the asset left by us, which is true in most cases. However, there is always a possibility of vested interests creating hassles. At the same time, you need to share with your nominee the details of your investment. Nomination is very important. Do not skip any detail just because you don’t have it handy while filling up the form. Rather take the form home and submit it the next day after you have filled completely. Nothing will be lost by a day’s delay. A little effort from your side will do a lot of good in the case of your unfortunate demise. You do not want your nominee or legal heirs running to court to claim what is rightfully theirs after your demise.

Finally, nomination and legal heir are legal terms. Law might interpret them differently. It is important for investors to read the terms and conditions for nominee rights as well as contact a lawyer to clarify any queries. The writer is

the CEO of bankbazaar.

com