Nominees across different assets - the definitive guide
Understand how nominations work across bank accounts, insurance, investments & more
Imagine this: Ramesh, a hardworking professional, diligently saved and invested throughout his life to secure his family’s future. He nominated different family members at different points in his life for his bank accounts, insurance policies and many other assets - assuming everything was set. But after his untimely passing, his family faced legal challenges when his siblings contested ownership of the assets. Why? Because Ramesh, like many others, misunderstood how nomination works in India.
Nomination is more than just a name on paper—it’s a vital part of financial planning. This blog will clarify how nominations work, who can be nominated, and the nuances across different types of assets to help you avoid such pitfalls.
What is Nomination?
Nomination allows you to appoint a person to manage or receive your assets after your death. However, in most cases, a nominee is not the owner but a custodian of the asset. The final ownership is decided by a will or legal succession laws.
For example:
If Ramesh nominates his wife for his bank account, she can access the funds as a nominee. But other legal heirs (e.g., children or parents) still retain ownership unless a will specifies otherwise.
How Nomination Works for Different Assets in India
Here’s a detailed look at how nomination works for various financial assets and their nuances:
1. Bank Accounts (Savings, Fixed Deposits, Recurring Deposits)
Who Can Be a Nominee?
Any individual: family members, non-family members, or minors (with a guardian).
How It Works:
The nominee gains access to the funds but doesn’t become the legal owner. Ownership depends on succession laws or a will.
Nuances to Note:
If no nominee exists, legal heirs must obtain a succession certificate, which can be time-consuming and costly.
In joint accounts, the surviving holder typically gains access without involving the nominee.
Example:
Sunita, a homemaker, was the nominee for her husband’s bank account. After his demise, the funds were released to her by the bank, but her son later claimed legal ownership as the rightful heir.
2. Insurance Policies
Who Can Be a Nominee?
Family members (spouse, children, parents) or non-family members.
Under the Married Women’s Property Act (MWPA), only the spouse or children can be nominees.
How It Works:
The nominee receives the death benefit unless overridden by a valid will.
Nuances to Note:
Policies under MWPA are protected from other legal claims.
Failing to update the nominee after marriage or divorce can lead to disputes.
Example:
Ravi nominated his mother for his term insurance policy before marriage. After his death, his wife contested the claim, but the insurance company released the funds to his mother since he hadn’t updated the nomination.
3. Mutual Funds and Demat Accounts
Who Can Be a Nominee?
Any individual, including minors (with a guardian).
Multiple nominees can be assigned with specific percentage shares.
How It Works:
The nominee receives the investment units but doesn’t automatically own them.
Nuances to Note:
If no nominee exists, heirs must provide a succession certificate.
Non-individual entities like trusts cannot be nominees.
Example:
Meera nominated her sister for her mutual fund investments. After Meera’s death, her sister claimed the units but faced a legal challenge from Meera’s children, who eventually gained ownership.
4. Employee Benefits (PF, Gratuity, Pension)
Who Can Be a Nominee?
Only family members: spouse, children, or dependent parents.
Non-family members can be nominated only if no family exists.
How It Works:
Nominees receive benefits like PF or gratuity directly.
Nuances to Note:
If family members exist, any nomination of non-family members is invalid.
Errors in EPFO details can delay claims.
Example:
Rajesh nominated his best friend for his PF account. After Rajesh’s marriage, the nomination became invalid, and his wife was declared the rightful recipient.
5. Real Estate (Housing/Cooperative Societies)
Who Can Be a Nominee?
Any individual, including minors (with a guardian).
How It Works:
The nominee facilitates the property transfer but is not the owner unless specified in a will.
Nuances to Note:
Without a will, heirs must undergo a legal succession process to gain ownership.
Housing societies often require formal approval for non-family nominees.
Example:
Kiran nominated his daughter for his flat in a cooperative society. After his death, his wife claimed ownership as per the Hindu Succession Act, leading to a lengthy legal process.
6. Locker Facilities and Safe Deposits
Who Can Be a Nominee?
Any individual, including minors (with a guardian).
How It Works:
The nominee gains access to locker contents but doesn’t own them.
Nuances to Note:
Without a nominee, heirs need a court order to access the locker.
Joint locker holders must agree on a single nominee.
Example:
After Arjun’s death, his nominee (nephew) accessed the locker’s contents, but the court later declared his wife as the rightful heir to the valuables.
7. Post Office Investments (PPF, NSC, KVP)
Who Can Be a Nominee?
Any individual, including minors (with a guardian).
How It Works:
The nominee receives the maturity value but doesn’t own the investment unless specified in a will.
Nuances to Note:
PPF allows only one nominee per account, while other schemes may allow multiple nominees.
Example:
Ashok nominated his son for his PPF account but didn’t create a will. After Ashok’s demise, his wife and daughter also claimed a share in the proceeds.
8. Bonds (Corporate or Sovereign)
Who Can Be a Nominee?
Any individual; trusts or companies cannot be nominees.
How It Works:
The nominee receives bond proceeds but is not the legal owner unless specified.
Nuances to Note:
Without a nominee, heirs must provide legal documents like a succession certificate to claim the bond.
Example:
Deepa nominated her friend for her sovereign gold bonds. After her death, the bonds were released to her friend, but her legal heirs contested ownership in court.
Key Takeaways for Better Financial Planning
Understand Nomination: Nominees are custodians, not owners. Use a will to define ownership clearly.
Keep Nominations Updated: Major life events like marriage, divorce, or childbirth require updates to nominees.
Choose Nominees Thoughtfully: Select someone trustworthy and inform them about their role.
Ensure Documentation: Maintain updated nominee details and supporting documents to avoid delays and disputes.
Conclusion
The examples above teach us an important lesson: nominations are critical, but they don’t replace succession laws, or a will. By understanding the nuances of each asset class, updating nominations regularly, and combining them with a clear will, you can ensure a hassle-free transfer of your wealth to your loved ones.
Planning today can save your family unnecessary stress tomorrow. Take the time to review your nominations—it’s a small step that makes a big difference.
Once you do this- create a vault on SuperFam - add your asset details - and map your family members to each asset - ensuring they have access to all the information needed to inherit your assets, instead of being faced with long-drawn legal & bureaucratic hassles.
