{"id":2415,"date":"2011-05-16T14:54:57","date_gmt":"2011-05-16T09:24:57","guid":{"rendered":"http:\/\/mynation.net\/docs\/?p=2415"},"modified":"2011-05-16T14:54:57","modified_gmt":"2011-05-16T09:24:57","slug":"nominee","status":"publish","type":"post","link":"https:\/\/mynation.net\/docs\/nominee\/","title":{"rendered":"Will your Nominee get the money on your death?"},"content":{"rendered":"

Will your Nominee get the money on your death?- Legality
\nWill your Nominee get the money on your death?<\/strong>
\nDid you think that your nominee is the person, who will get all the money legally from your Life Insurance Policy and Mutual funds investments? Ha!
\nThat is exactly what you\u2019d think if you aren\u2019t aware of the legal aspects.
\nWe assume a lot of things which sounds like they\u2019re obvious, but are not true from the legal point of view. Today, we\u2019ll concentrate on nominations in financial products.<\/p>\n

For whom are we earning? For whom are we investing? Who, do we want to leave all our wealth to, in case something happens to us? It might be your children, your spouse, parents, siblings etc., or just a subset of these.
\nYou also might want to exclude some people from your list of beneficiaries!. So you think you will nominate person X in your Insurance policy, and when you are dead and gone, all the money goes to person X and he\/she becomes the sole owner? You\u2019re wrong, dude ! It doesn\u2019t work that way. Let\u2019s see how it actually does!<\/p>\n

What is a nominee?<\/strong>
\nAccording to law, a nominee is a trustee not the owner of the assets. In
\nother words, he is only a caretaker of your assets. The nominee will only
\nhold your money\/asset as a trustee and will be legally bound to transfer it
\nto the legal heirs. For most investments, a legal heir is entitled to the
\ndeceased\u2019s assets. For instance, Section 39 of the Insurance Act says the
\nappointed nominee will be paid, though he may not be the legal heir. The
\nnominee, in turn, is supposed to hold the proceeds in trust and the legal
\nheir can claim the money.<\/p>\n

A legal heir will be the one whose is mentioned in the will. However, if a
\nwill is not made, then the legal heirs of the assets are decided according
\nto the succession laws, where the structure is predefined on who gets how
\nmuch. For example, if a man during his lifetime executes a will. In the will,
\nhe mentions his wife and children as legal heirs, then after his death, his
\nwife and children are the legal owners of his assets. It is essential that one
\nneeds to execute a will. It is the ultimate source of truth and replaces the
\nsuccession law. Nominee can also be one of the legal heirs.
\nImportant\u0097 Mention the Full Name, Address, age, relationship to yourself
\nof the nominee. Do not write the nomination in favour of \u201cwife\u201d and
\n\u201cchildren\u201d as a class. Give their specific names and particulars existing at
\nthat moment. If the nominee is a minor, appoint a person who is a major
\nas an appointee giving his full name, age, address and relationship to the nominee.<\/p>\n

Why is the concept of nominee?<\/strong>
\nSo you might be wondering, if the nominee does not become the sole
\nowner, why does such a concept of \u201cnominee\u201d exist at all? It\u2019s pretty
\nsimple. When you die, you want to make sure that the Insurance
\ncompany, Mutual fund or your shares should at least get out of the
\ncompanies and go to someone you trust, and who can further help, in
\nprocess of passing it to your legal heirs.<\/p>\n

Otherwise, if a person dies and hasn\u2019t nominated anyone, your legal heirs
\nwill have to go through the process of producing all kind of certificates like
\ndeath certificates, proof of relation etc., not to mention that the whole
\nprocess is really cumbersome! (For each legal entity! The insurance
\ncompany, the mutual funds, for the shares, for the real estate..) . So, to
\nsimplify, if a nominee exists, these hassles don\u2019t happen, since the
\ncompany is bound to transfer all your money or assets to the nominee.The
\ncompany the goes out of scene & then, it\u2019s between nominee and legal heirs.<\/p>\n

Example of Nomination<\/strong>
\nAjay was 58 years old who died recently in an accident. As his children
\nwere settled, he wanted to make sure that his wife is the sole owner of all
\nthe monetary assets. This includes his insurance policy and mutual funds.
\nSo during his lifetime, he nominated his wife as a nominee in his term
\ninsurance policy and mutual funds investments. However, after Ajay\u2019s
\ndeath things didn\u2019t turn up the way he wanted. The reason being Ajay did
\nnot leave a will. Though his wife was the nominee in all his movable assets,
\nas per the law, his wife, along with children, were the legal heirs and all of
\nthem had equal right to Ajay\u2019s assets.<\/p>\n

One simple step which could have saved the situation was that Ajay
\nshould have made a will which clearly stated that only his wife was
\nentitled to get all the money and not his children.<\/p>\n

IMPLICATIONS OF NOMINATION ARE DIFFERENT FOR EACH CATEGORY !!<\/strong><\/p>\n

Nomination in Life Insurance<\/strong>
\nA policyholder can appoint multiple nominees and can also specify their
\nshares in the policy proceeds. Nomination in life insurance has one
\nlimitation, as insurance policies are bought to secure your financial
\ndependents, your first choice of nominee has to be your family members.
\nIn case you want to nominate a non-family member like a friend or third
\nparty, you will have to show\/PROVE the insurance company that there is
\nsome insurable interest for the person. This happens because of a Clause
\ncalled PRINCIPAL OF INSURABLE INTEREST in insurance. Note that provision
\nof nomination in life insurance is related to Section 39 of the Insurance
\nAct. Note that as per LIC website<\/p>\n

Nomination is a right conferred on the holder of a Policy of Life Assurance
\non his own life to appoint a person\/s to receive policy moneys in the event
\nof the policy becoming a claim by the assured\u2019s death. The Nominee
\ndoes not get any other benefit except to receive the policy moneys on
\nthe death of the Life Assured. A nomination may be changed or
\ncancelled by the life assured whenever he likes without the consent of the Nominee.<\/p>\n

Make sure, you have a nominee for your policy for easy settlement of the
\nclaim, if you do not have any nominee mentioned in the policy, it can turn
\nout to be a disaster for your dependents to get a claim.<\/p>\n

Nomination in Mutual funds<\/strong>
\nIn case of mutual funds, you can nominate up to three people, who can
\nbe registered at the time of purchasing the units. While filling in the
\napplication form, there is a provision to fill in the nomination details. Even
\na minor can be a nominee, provided the guardian is specified in the
\nnomination form. You can also change nomination later by filling up a
\nform which is available on the mutual fund company website. Nomination
\nin mutual funds is at folio level and all units in the folio will be transferred to
\nthe nominee(s). If an investor makes a further investment in the same folio,
\nthe nomination is applicable to the new units also. A non-resident Indian
\ncan be a nominee, subject to the exchange control regulations in force
\nfrom time to time.<\/p>\n

Nomination in Shares<\/strong>
\nQuiz for you . Now you know what a nominee means and who actually
\ngets the money. So if there is a husband H, with wife W and nephew N,
\nand he has nominated his nephew N to be the nominee of his shares in
\ndemat account, who will have the legal right to own the shares after
\nhusband\u2019s death? If you answer is wife, you are wrong in this case! In case
\nof stocks, it does not work the usual way, if a will does not exist.
\nIn the verdict, Justice Roshan Dalvi struck down a petition filed by Harsha
\nNitin Kokate, who was seeking permission to sell some shares held by her
\nlate husband. The Court noted that as she was not the nominee, she had
\nno ownership rights over the shares. Ms Kokate\u2019s lawyer had argued that
\nas she was the heir of her husband who had died intestate (without a will),
\nshe should have ownership rights of the shares, and be able to do
\nanything with them as she wished. In this case, Ms Kokate\u2019s husband had
\nnominated his nephew in favour of the shares. Justice Dalvi however
\nnoted that under the provisions of the Companies Act and the
\nDepositories Act, Acts which govern the transfer of shares, the role of a
\nnominee was different.\u201cA reading of Section 109(A) of the Companies Act
\nand 9.11 of the Depositories Act makes it abundantly clear that the intent
\nof the nomination is to vest the property in the shares which includes the
\nownership rights thereunder in the nominee upon nomination validly
\nmade as per the procedure prescribed, as has been done in this case.\u201d
\nIt means that if you have not written a will, anyone who has been
\nnominated by you for your shares will be the ultimate owner of those
\nstocks, The succession laws on inheritance will not be applicable but in
\ncase, you have made a will, that will be the source of truth.<\/p>\n

Nomination in PPF<\/strong>
\nLet me give you some shock first. If you have Rs 10 lakh in your public
\nprovident fund (PPF) account and you have not nominated anyone for
\nyour PPF account, your legal heirs will get maximum of Rs1 lakh only! Yes,
\nit\u2019s so important to have a nominee, now you get it. You can nominate
\none or more persons as nominee in PPF. Form F can be used to change or
\ncancel a nomination for PPF. Also note that you cannot nominate anyone
\nif you open an account for a minor.<\/p>\n

Nomination in Saving\/Current\/FD\/RD Account in Banks<\/strong>
\nFD\u2019s also come with nomination facility. While opening a new account,
\nthere is a column for nomination in the same form and you should fill it.
\nYou can nominate two persons with first and second option. Note that in
\ncase you have not done any nomination till now, you should request Form
\nNo DA-1 from your Bank which is used to assign a nominee in future.
\n(Examples of ICICI Bank , HDFC Bank , Canara Bank) . In the same way to
\nchange\/cancel the nomination you need to fill up Form no DA-2. Read
\nabout Corporate Fixed Deposits<\/p>\n

As per a famous case, A Bench of Justices Aftab Alam and R M Lodha in
\nan order said that the money lying deposited in the account of the
\noriginal depositor should be distributed among the claimants in
\naccordance with the Succession Act of the respective community and
\nthe nominee cannot claim any absolute right over it.<\/p>\n

Section 45ZA(2)(Banking Regulation Act) merely put the nominee in the
\nshoes of the depositor after his death and clothes him with the exclusive
\nright to receive the money lying in the account. It gives him all the rights of
\nthe depositors so far as the depositors\u2019s account is concerned. But it by no
\nstretch of imagination make the nominee the owner of the money lying.<\/p>\n","protected":false},"excerpt":{"rendered":"

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