We always talk about creating enough wealth to financially secure our family's future. However, many of us often leave the ‘nominee(s)’ section blank while filling up the bank deposit application or other investment forms. Here's why the ‘nominee(s)’ details are as important as other details in these forms:
What is nomination?
Nomination is nothing but authorising a person to claim the proceeds of your account or investments after your demise for the beneficiary or beneficiaries. It is important to note than a nominee is only a trustee of the assets unless the Will specifically mentions the nominee as the legal heir who has a right to claim the assets. If the Will doesn't specify so, other legal heirs can claim the assets. Insurance, however, stands as an exception, where the nominee is the beneficiary.
Why is nomination important?
Dealing with death is painful and leaving your loved ones struggling to claim your assets after your demise is the last thing you would want. Nominating a person makes it easier to claim your assets for your loved ones. A failure to fill up nomination makes death claim settlement difficult as it would require a number of documents which include death and succession certificates, Will and others, creating unnecessary hassle.
“There is startling data from the RBI which shows thousands of crores of unclaimed deposits lying in banks across the country… This by itself is a proof of how difficult it can be to retrieve your money where there is no nomination done,” says a report by L&T Financial Services.
Besides, incorrect details or wrong details of nominees increase the risk of your finances being misused or being attached by banks and fintech organisations under certain specified regulations.
Things to keep in mind while filing nomination
One must mention the full name, age, address and relationship with the nominee accurately. If case the nominee, who is also the legal heir is a minor, you must appoint a person giving their accurate details, directing them to pass on the assets once the intended nominee is an adult.
Some investments let you name multiple nominees allowing you to mention the percentages of your money you want go give each of them. If the percentage is not mentioned, the assets are shared equally among the nominees.
Also, there is no rule that mandates that you need to name the same nominee(s) for your finances. You can choose different nominee(s) for different assets. For example, you may put your mother’s name in your life insurance policy and your wife’s name in your bank deposits and provident funds while your mutual funds may be in your son’s or daughter’s name. This way, you can leave something for every loved one depending on your income.
It is to be noted that you can put in only one nominee’s name in your bank account and you must mention the share allowed to each nominee in your EPF.
If you want to change your nominee’s name due to death or any other reason, you must always approach the concerned authority to update the nominee’s details.
So, next time you open a savings account or invest your money, make sure to fill in the nomination details correctly to validate the purpose of your savings and investments.
