Why Nominee and Nomination are Important? All You Need to Know About Nominee and Nomination

3 min read

In this article, we will deep dive into the concept of Nominees and Nominations. Who is Nominee, Why is it important to do a nomination, who can be the nominee, and what are the important points to note? Let’s discuss all these questions as we move forward.

Who is Nominee?

  • A nominee is a person whose name is titled on the investments, property, or securities of the investor after his/her death.
  • The nominee is not a legal heir and is considered a custodian.
  • The responsibility of the nominee is to safely divert the assets to the legal heir of the investor.

Why is it Important to do a Nomination:

  • In case of death, there are several complexions for the legal heir to claim the assets of the death of an individual.
  • For ease of transfer of the assets to the legal heir, the nomination is important.

Who Can be Nominee:

  • The nominee can be anyone either any of the family members, friends, relatives, minor (with guardian only), state/central/local government authorities, charitable/religious trust, and NRI-subject to FEMA rules.
  • Minor can also be the nominee of the individuals but with the presence of a guardian.

Who Can Not Be Nominee:

The following person cannot participate as a nominee:

  • Society
  • Company, LLP
  • HUF
  • Private Trust
  • Guardian cannot be the nominee in the investment of minor

Where does the Nomination need to be checked?

In the following areas, nominations need to be checked or there should be nominations:

  • Bank Account
  • Insurance
  • Shares
  • Demat Account
  • National Saving Certificate (NSC)/Post Office Schemes/KVP
  • Public Provident Fund (PPF)/Employee Provident Fund (EPF)
  • Locker
  • Housing Society

Types of Nominee:

There are two types of nominees: Multiple Nominee and Successive Nominee

  • Multiple Nominee: It refers to the condition where an individual can assign more than one or two nominees to a particular asset/investment. In case of multiple nominees, the share needs to be assigned, in absence of these, the assets are equally distributed among the nominees.
  • Successive Nominee: It refers to that condition where if the first nominee does not exist, the next nominee will be the legal nominee.

Special Considerations:

In the following cases, the nominee is considered to be the legal owner and not Custodian:

  • Insurance: If a Partner/Spouse/Kids or Blood Relatives are nominees of the insurance scheme, they are considered to be the legal owner.
  • Employee Provident Fund: If a Partner/Spouse/Kids or Blood Relatives are nominees of EPF, they are considered to be the legal owner.
  • MWP: Kids and Spouses could be the only nominee here and hence they are the legal owner of the policy
  • Shares: Whosoever nominee is assigned to the securities of individuals, he/she will be the legal owner of the securities/assets.

Important Points:

  • The name of the nominee should be correct
  • Identification documents of the nominee should be there
  • The nominee should ensure that the money or the benefits received should be carefully diverted to the legal owner of the particular securities or assets.
  • Guardian should be appointed in the case of a minor

What Should Individuals Do:

Nominee to the assets/securities/properties is an important factor one need to adhere to as it simplifies the process of transfer of assets/securities/properties in case of death of the individual. Nominees are the legal custodian of these assets and are legal owners in some cases hence one should carefully appoint nominees to their assets or securities.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

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