Nominations to which assets?
If I have a bank account or a life-insurance policy on my own life, I can ‘nominate’ someone to receive the amount after me. If I have shares or debentures in companies or units in mutual funds, I can ‘nominate’ someone to whom these will be transferred after me. After me, my nominee will receive the amount or get shares transferred to his name. I can also make a nomination to my pension, provident fund, gratuity, government securities, and to my membership in cooperative housing societies if the State law allows.
I can make a nomination if I hold these assets in single name or joint names. The nominee will collect the asset after the death of all joint holders.
I can make a nomination when I acquire the asset. I can change the nomination at any time.
A nomination is very useful for collecting these assets after me. My nominee will approach the institution (the bank, company, fund or society) to collect the amount or transfer the asset to his name. The institution will verify his identity. It must pay or transfer the asset to him. Expenses of this payment or transfer will be small.
If I do not make a nomination, and the amounts are large, these institutions will not pay or transfer the asset to any heir directly. My heirs will be required to spend money and time in fetching court orders for collecting these assets. If I make a nomination, it is easier for them.
I can nominate only a member of my family to my provident fund, gratuity, or pension. I can nominate any person to receive my asset from other institutions. Rules of some institutions allow me to have many nominees.
Will nominee own it?
I might think that if I nominate my son to receive all amounts, shares and units, he will own these assets after me. This is not correct. My nominee is only a collector of the amount. After me, the amount does not belong to him. He must collect the amount and distribute it to the persons entitled: my heirs or persons stated in my will.
But if I have nominated my spouse, children or parents to my life-insurance policy, generally the nominee will own the amount and can keep it.
Of what use is it to nominate? Nomination is a facility. The asset can immediately be collected from the institution. The institution is willing to give it to the nominee because it gets a ‘valid legal discharge’. Other heirs or claimants cannot complain.
What I must do
In order to make it easy for my nominee to collect the asset, I must fill the nomination form with attention. I must write the full and correct name of my nominee matching his identity document, and his correct date of birth and address. Some institutions also require other details, like photograph and PAN. This helps institutions identify nominees when they make claims. I must also make sure that my nomination is recorded by the institution, and the asset document (like passbook, deposit receipt, MF slip) mentions the nominee’s name. I must note nomination details in my list of properties.
If I wish that my nominee must own the asset, I must also give it to him in my will.
I must make a nomination wherever possible.
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– Nilima Bhadbhade