Recently, I heard an incident about a woman who unfortunately lost her husband in an accident. No one can understand the pain but the woman. Fortunately, the woman was well financially educated and had enough information about her husband’s investments, which made her comfortable deal with the situation but there was one roadblock – “Nomination”. Her husband regrettably missed her name to nominate in some of his major investments, which caused problem in transferring the investments on her name. Eventually, the issue was sorted out by ending up in lot of legal headache and stressful situation.

Every time we fill the application for Mutual Fund / Investments, we come across a nomination column but we miss it many a times. If an investor is investing his hard earned money to secure his / family’s future then he should be responsible for filling the nomination as well, which will ease the transfer process when he is not around.

So, what is Nomination?

Nomination is the process of appointing a person who usually can be a family member or trustworthy friend, for rightfully transfer of ownership of assets/investments. Nominating a person does not implies full transfer of ownership but the nominee will be only a custodian of your investments. Nominee is not a legal heir but nominee will legally get ownership when his name is included in asset holders WILL. In other words, when you are assigning someone as a nominee then he/she is mere custodian and legal beneficiary of investment and not the owner unless otherwise specified in your WILL.

Now since you know what it is. Let’s see how to do it.

Procedure for Nomination

Nomination Procedure is simple. While filling up an application form for any new investment e.g. Mutual funds, Insurance, Bank accounts or Demat account, fill up all required “Nomination Details” in nominee section.

If you forgot to enter nomination details in your earlier investments, Insurance, Bank account or Demat account you can always update it at later stage.  Just check it out with the company’s front desk office.

Nominee should be a major like spouse, parent or a trustworthy friend. Married couples generally assign spouse name as nominee and / or their child’s name. If nominee is a minor then investor need to provide Guardian’s details. An Investor can change the name of nominee anytime.

Why Nomination is needed?

Nomination in investments is in interest of an investor as in the event of his/her death, transfer of investments will be hassle free and nominee could liquidate investments in a needy situation. After the death of an asset holder, the transfer of investments or assets cannot be transferred directly until the legal claim process is done. The assigned nominee has to inform the concerned investment company or bank about the death of an asset holder and then need to submit all required mandatory forms to initiate the transfer.

Every investments has its own procedure for transfer as per the regulation. In case of company bonds and shares, nominee would be the beneficiary as per companies act. But all other investments/assets like real estate, mutual funds, bank accounts, name of the nominee must match with the name of beneficiary/beneficiaries in the WILL.

Nomination is a very small step which helps to safeguard the future of your near and dear ones. Skipping this important step can become a major challenge for your family when you are not around. If you are preparing the WILL you should include the same name(s) of nominee(s) as beneficiaries to avoid conflict. It will ensure hassle free transfer of investments and assets.

So, take a step back and pull all your old investments and make sure your nomination is up to date. See you next time.

Source:

1. Economic Times
2. Money Control