Is nomination enough to transfer the ownership of any assets?

                    

           According to the encyclopedia the meaning of “Nomination” is the act of officially suggesting someone or something. The term “Nomination” has wide meaning. Nomination is the act or process  through which any person who owns assets (like Mutual Funds, Insurances Policies, other Securities/ Bonds/ Debentures, Shares, Bank Accounts, Societies, NSC, Post Office, PF, PPF & gratuity, Demat Accounts, Lockers), may appoint one or more nominees for such financial assets. Nominee is entitled to receive such financial assets after the death of actual owner. Through nomination one can authorize someone to receive assets on his/her behalf. Nomination comes into effect after the death of the actual Owner. The most important thing in nomination is that nominee can be changed at any time during the life span of the Owner of such financial assets.

Basically, nominee exclusively holds the right to receive and takes care of the asset of such Owner but not the ownership of the said asset/assets. In a renown judgment (Smt. Sarbati Devi V. Smt. Usha Devi AIR 1984 S.C. 346) of Supreme Court, it was decided in 1984, that nominee is a trustee of the property and is liable to hand over the same to the lineal descendants/ legal heirs. It had been decided by the Court nomination does not confer any beneficial interest in the nominee and other heirs can claim that amount in accordance with the law of succession governing them. Nomination does not create any title or interest in favor of the nominee. Therefore, nominee is mere trustee to whom assets has been transferred as prima facie after the demise of such owner of asset(s). All the legal heirs of the deceased owner have right to claim such asset as per succession laws and the nominee cannot exclude such other legal heirs. In other words, it can be easily said that a provision of succession law will not be affected by nomination. Technically, it can be said that nominee is just custodian or care taker.

Important Information related to Nomination:

•      Any person can be selected as nominee of one’s asset. Even a minor can also be selected as nominee. There is no prowess required to be nominee.

•          Nominee can be appointed by the Bank Account holders who have their bank account(s) either under their individual names or under the joint names.

•         Non-individuals including society, trust, body, corporate, partnership firm, Karta of Hindu Undivided Family(HUF), holder of Power of Attorney can neither nominate nor be a nominee. All the afore said non-individuals can nominate or be a nominee in their individual capacities.

•         Nomination cannot be made in case of representative capacity such as the holder of an office e.g. Secretary of an Association, Director of a Company, Karta of an HUF, Partner of a firm.

•          A sole proprietor can appoint a nominee for the sole proprietorship bank account.

•          There are some investments (e.g. Mutual Fund, other Insurance Policies) where investor/ owner of such investment can appoint more than one nominee.

•         A Non Resident Indian can also be appointed as nominee.

•          One can appoint nominee for his/her safe deposit locker(s).

•          A minor can also be nominated for bank account(s) or for other cases. Provided that the name, address and contact number of the guardian of the minor nominee(s) should be given in nomination form.

If there is no nominee against your assets, it might not be a hassle free work for the dependents/ legal heirs of the deceased to claim such asset and get share out of such asset.  Nomination is not mandatory rule. It is an optional rule by following which hassles can be avoided.

We all are oblivious about all the laws of nomination. Rules of Nomination against financial assets are here under-

•          The RBI guidelines clear specifies one thing that the money lying deposited in the account of the depositor should be distributed among the legal heirs/claimants as per the Succession laws or according to the instruction of the depositor’s Will or Testament but the nominee cannot claim any absolute right over it. 

•         In case of EPF (Employee’s Provident Fund) and mutual funds, insurance and for other financial assets, employee can select multiple nominees and the ratio of distribution of fund will be mentioned therein. There is an exclusive rule for EPF that family members can only be chosen as a nominee but employee who does not have any family, can choose any one as nominee. After having family, one should instantly change the nominee and has to keep any family member as nominee. In case of mutual funds or other assets, it is not mandatory rule to appoint family member as nominee.

•          In case of PPF (Public Provident Fund), the nominee has to show the proof of being successors/ legal heirs (Succession Certificate) before receiving any assets from the actual owner.

•          The funds of actual owner shall be passed on to the appointed nominee after the demise of the actual owner. After transferring the assets to the nominee, it ought to have been transferred to the legal heirs or other claimants of the deceased owner as per Succession Laws. The enigma in the rule of nomination is always persists in each case of nomination but it is oblivious to all most people.

Henceforth, we should make Will along with nomination. Mere nomination does not fulfill our desires and by making nomination, nominee’s right is not protected too. In spite of making nomination, nominee is not completely entitled to retain the assets of the deceased owner permanently.

 Both in regard to joint holding as well as nomination, it needs to be borne in mind that the joint holder enjoys the privilege of withdrawing the investment and the nominee is entitled to collect the proceeds of the investment. This essentially facilitates the smooth operation and passing over of investments. But the joint holder or the nominee do not automatically become the legal owner of the property of the deceased, until so specifically directed under his Will.

Nomination is not the substitute of Will. Even it will never be…… Now the question is “what if the legal heir is your nominee!!!”  I must say here clearly that still the right of your legal heir in the form of nominee is not secured until you are making Will by specifying his benefits. Now the question is “WHY??” Your nominee would be lucky enough if there is no claimant, in that case, nominee can enjoy 100% your asset alone by producing succession certificate/ showing other corroborative proof to be a legal heir. What if there is any other legal heir/ claimant!! Even you might not be well acquainted about the complication of classes of legal heirs. In this case the nominee in the form of legal heir is not secured. Here, nominee must distribute such asset/ assets amongst the legal heirs/ claimants as per succession laws and he might keep his share of such asset by giving proof to be legal heir. Estate planning is not a cakewalk thus it is suggested that please make yourself aware before making any estate planning. For making an immaculate Will to secure the rights of the legal heirs in the form of Will, please do contact us at www.dilsewill.com

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Author: Shreya Nandi (Legal Executive Officer)

This blog is informative in nature. Please do not consider this blog as the legal advice. For any legal assistance, please do contact us at www.dilsewill.com or call us 033 4006 9589.