A way without the Will
My retired friend Krishnan wanted to make proper arrangements for the inheritance of his assets to his daughter on his demise. Like most middle class Indians, he has a residential flat, an equity share portfolio, mutual fund investments, bank fixed deposits and some insurance policies. He wished to ensure an arrangement which his son (with whom he had a strained relationship) would not be able to dispute.
He had seen court battles over inheritances in his extended family and was keen to avoid lawyers and wills. He checked whether nominating his daughter with the cooperative society, bank, depository participant, mutual fund house and life Insurance company would be sufficient to ensure that she inherited the money without problems. He was very enthused by a news article about a recent Supreme Court decision regarding a flat in a cooperative society asking the Society to transfer the flat to the daughter who was nominated by the owner.
When I informed him that this was a complex legal issue, he was a little dismayed. There were a plethora of decisions but the courts had consistently held that a Nominee was merely an agent to receive the property (or money) on the death of the owner. The Nominee was accountable to the legal successors of the deceased owners. The Supreme Court’s decision, he cited, had upheld the same principle, notwithstanding the misleading headline.
I referred him to a good lawyer to draft a proper will and take steps to register it, if so advised. He could try and minimise the chances of any legal challenge by his son but it could not be guaranteed. We have seen how even the wills of prominent people have been challenged by their disinherited children despite an airtight will.
For various reasons, most people don’t like making wills. Yet, most of them do take care to have nominations in place to ensure smooth transfer of the asset on their demise. They feel it is enough to indicate their wishes regarding inheritance and in most cases, they don’t know that it can be disputed by other legal heirs who are not nominated. Like Krishnan, most people would want this simple nomination process to create a binding transfer in favour of their nominee while excluding any other legal heirs.
The Supreme Court had held that in the absence of legislative changes, the consistently-held view on the nominees’ status as a mere agent cannot be changed. The only change made so far has been in the Life Insurance Act in 2015, which seems to finally confer the right of legal ownership, on the nominee (if the nominee is the spouse, parent or child of the policy holder). These changes have yet not been tested in the court of law so it is not known if it will hold true. But more such specific changes in the Acts especially in the context of cooperative housing societies, banking, demat and mutual fund regulations will ensure that most people rest easy about the transfer of their assets after their demise. State governments can also do their bit by amending the Cooperative Housing Societies Act on the same lines as the Insurance Act. It should improve the ease of doing business rankings and ease the load of case laws in Courts. Also this is a far less controversial amendment to personal laws as compared to the Uniform Civil Code.
The apex court has consistently ruled that a Nominee is merely an agent to receive the property (or money) on the death of the owner and is accountable to legal heirs