Why the legacy of Indians has to be secured by more than simply a nominee

 Why the legacy of Indians has to be secured by more than simply a nominee

People may enjoy peace of mind knowing that their assets will be handled and dispersed in accordance with their preferences by combining the nomination with a well-written will.

Why making a will is essential to ensuring orderly transfer of property

There is an urgent need to correct a persistent misunderstanding that often causes confusion as the deadline of December 31, 2023 for designating nominees to different bank accounts approaches.

In India, it is customary to nominate individuals to open demat accounts, fixed deposits (FDs), bank accounts, and mutual fund (MF) investments. Contrary to popular misconception, naming someone as a nominee does not immediately make them the legal successor to the nominee's possessions.

A nominee is not a legal heir but rather the custodian of the assets under Indian law. A legally valid will is necessary to guarantee the appropriate transfer of money or assets to their intended owner.

Significance of the nomination

In India's financial system, nominations are essential. The asset transfer procedure is streamlined via nomination, which also ensures that the account holder's wishes are made apparent. Without a nominee, legal heirs may have administrative challenges and delays while attempting to access assets. Nomination ensures that the assets are safeguarded and may be properly passed to the lawful heirs in the case of the account holder's death.

Regular updates to the nomination are crucial, particularly if the circumstances of the candidate or the nominator have changed. For instance, one must update their nominations and add or delete the spouse or ex-spouse in the case of a marriage or divorce. Similar to this, a new candidate should be nominated if an old nominee passes away or becomes unable.

Function of a Nominee

A nominee has a particular function, whether it is for a demat account, bank account, FD, or MF. They only hold the assets in trust for the legitimate heirs until that time. This difference becomes important if the decedent had legal heirs or if someone wanted to transfer assets differently from what was specified in the nomination form.

A nominee serves as a middleman in the process; they do not legally own the assets or inherit them.

Another prevalent misunderstanding is that the legal inheritance rules do not apply to nominations. Legal heirs are those who are entitled to the dead person's property in accordance with the Hindu Succession Act, 1956 (or other applicable laws depending on one's faith). Legal heirs include partners and children, but assets may pass to parents and other close relatives as well. Nomination alone does not trump the legal entitlement of all legitimate heirs to the estate's assets. In the event of a dispute, the legal heirs recognized by the law shall take precedence.

To help you better comprehend a nominee's function, here is an example. Anita, a working lady of 28 years old, has substantial financial resources in FDs, MFs, and a demat account. She designated her father as the nominee for all of her bank accounts before getting married because she wanted him to inherit all of her assets in the event that she passed away.

Tragically, a few years after being married, Anita lost her life in a car accident. Due to the fact that she passed away without leaving a will, distribution of her assets became complex. The Hindu Succession Act determined that Anita's husband and two children were her legal heirs upon her marriage, negating the inheritance rights of her father.

Due to Anita's lack of a will, her assets were divided evenly between her husband and children in accordance with the law. She could have specified exactly how she wanted her assets to be dispersed if she had written a valid will.

need a will

A person's last will and testament, or will, is a legal document that specifies how their property will be dispersed after death. A will, as opposed to a nomination, specifies exactly how assets should be distributed.

A will also permits the selection of an executor, who will supervise the asset distribution and guarantee that the decedent's intentions are respected.

People may enjoy peace of mind knowing that their assets will be handled and dispersed in accordance with their preferences by combining the nomination with a well-written will.