Why you should not forget to declare a nominee for your investments?
Business: Declaring a nominee in your investments helps immensely in ensuring hassle-free asset transfer to your family members when you are not around. Yet, many people continue to ignore this important aspect of financial planning, potentially landing their loved ones in legal complications and financial crisis.
Understanding Nomination
Nomination is a facility that allows an individual to appoint a person who can claim the proceeds of his investments or insurance policies in the event of his death. Notably, there is no cost associated with appointing a nominee and the nomination can be changed anytime. Shaishvi Kadakia, Partner, Cyril Amarchand Mangaldas, said, “It is highly advisable to register nomination in respect of all assets for which this facility is made available, for example, bank account, bank locker, demat account, mutual funds, flats in co-operative housing societies, provident fund accounts, etc.” He added, “This is because, if there is a nominee, after the death of the asset/account holder, the institution (such as a bank) will transfer the cash or property to the nominee without insisting on the production of documents such as probate, letters of administration or succession certificate.” Benefits of declaring a nominee Seamless access: The nominated beneficiary can access financial assets quickly and without any legal complications. This is especially important during challenging times when the family may need immediate financial support.
Financial security:
Nominating a nominee provides the beneficiary with the assurance that they are the rightful recipient of the assets. This clarity eliminates uncertainties about asset distribution and helps maintain family harmony. Asset protection: A valid nomination reduces the chances of disputes between legal heirs. Without a nominee, the assets may be vulnerable to claims by creditors or contentious legal battles, further complicating the situation for bereaved families. Flexibility and control: Filing a nominee allows individuals to take control of their financial legacy. It is advisable to review and update the nomination from time to time, especially after important life events such as marriage, divorce or birth of children.
Having a nominee greatly simplifies the process of collecting the assets of the deceased from institutions and also saves cost, effort and time, Kadakia said. “While appointing a nominee, it is advisable to align the nomination with the wishes contained in the person’s will so that there is no confusion or dispute between the nominee and the legal heirs, although courts have held that the rights of the legal heirs in law are greater than those of the nominee,” Kadakia said.
