At the time of opening any account – be it in an asset management company, bank or post office — investors are asked to nominate a nominee.
The idea behind this is to choose a nominee to whom financial assets would be transferred in case of investor’s demise. There is a popular perception that the nominee is the real owner of assets in such an eventuality.
But this is far from true.
There could be a slew of situations that could arise leading to disputes between the successors. And importantly, these disputes can occur despite one of the heirs being named a nominee.
For instance, what if there is one nominee and there are three legal heirs? And what would happen when nominee and legal heirs are closely related but are not the same? Also, what if the investor (now deceased) has signed a will that excludes the nominee as one of his heirs but does not change the nominee details in his account.
Here we take two of such cases to untangle the mystery where there is a possible conflict over who would be the rightful owner of the assets left behind.
Case I: Let us say Mr Rajesh has nominated a nominee (who is also one of the two legal heirs), but he has two legal heirs mentioned in his Will. How will his assets be distributed?
Case II: Let us imagine that Mr Rajesh has named a nominee and he also written a will that excludes that nominee. What will prevail (Will or the nomination details shared with the AMC)?
Case I: Nominee a mere trustee
To be able to understand the granular details of this case, it is imperative to first understand that nominee is just a trustee and not the rightful owner unless he also happens to be a legal heir.
While referring to the Case I, Darsh Golechha, Founder of Legacynext, Afthonia Labs-incubated start-up, said: “The funds from the AMC will first be transferred to the Nominee mentioned and the nominee (one of the legal heirs) is then required to distribute the funds received from AMC to the other legal heir as mentioned in the Will respectively.”
Ankit Garg, Advocate, Founder of Garg Law Chambers shares a similar opinion when he says: “The Nominee can undertake the process of transmission with the AMC to transfer the maturity proceeds to his/her account, however, Nominee is only a trustee and is liable to distribute the funds to the rightful legal heirs.”
Case II: ‘Will’ is the last word
Experts say that the ‘Will’ supersedes nomination and is seen as the final evidence of the desire of the deceased. However, to execute the will, it is vital to first procure a Will probate
“In case the person who has passed away has made a Will, the standard procedure would be to obtain a Will probate (a document obtained on court specifying and confirming the validity of the Will is to be obtained from the court after the demise),” says Mr Golechha from LegacyNext.
“After this document is arranged, the Will prevails. Until then, the funds can be transferred to the nominee who will ‘hold’ these funds as a custodian until the order from the court,” he adds.
Mr Garg also asserts similar sentiments and says the nominee cannot use the funds for their own benefit.
“For smooth transfer of funds from the AMC, the nominee being a Trustee of the deceased’s assets will apply to get the funds to his/her account and then transfer the funds as per the Will to the legal heirs,” he says.