Being an integral part of an investment process in general terms by word “NOMINEE” we understand that nominee gets the ownership of any assets on the death of the beneficiary owner.
But this is only a myth……!!!

As per law, NOMINEE is only a caretaker and not the beneficial owner. Nominee works as a trustee, and it is his legal responsibility to transfer it to the legal heirs as per Will or as per the Succession Act. A nominee may not necessarily be a legal heir or a relative. The nominee is only a name to be recorded by the financial organization (bank, mutual fund, the insurance company, post office, depository or any other) as they can handover investment or its value when the owner dies. A legal heir is a person whose name is mentioned in the Will or as per the Succession Act. It is the Will, which plays a vital role in the nomination and Succession Act. If there is no Will, then it is the “Succession Law” that come into force.

We should not consider that; the appointment of the nominee is useless. Both Nomination and Will have a separate role, and both are important. Nomination helps you to bypass the complex regulatory requirement to release the asset from any institution or organization and Will is required for smooth distribution of asset and to avoid family litigations.

Let’s assume that you have a life insurance policy for which you have previously appointed your wife as the nominee. Somehow there is some unhealthy position persists in your marital life and you want to make it sure, that your old age-dependent father and handicapped Brother should get benefit out of your wealth also.

In the absence of Will, Hindu succession law will affect, and the proceeds will be distributed as per “Class I Hires”, where there is no place for your father and your dependent brother, as they come in “Class II Hires”. To avoid this adverse situation, you should prepare a WILL, it will recode your desire and will come into force in the absence of you.

Nominating someone for your asset will only give the person the right to receive the asset. But the right to own that asset can only be given through a Will. Only in case of equity shares where nomination prevails, the nominees about to get the number of proceeds for which he is nominated. Even a minor or non-relative can be appointed as nominee for your equity shares.