Nominees in investmentsHalf the time people forget to appoint nominees for their investments and insurance policies and there is another section of the population that doesn’t understand how it has to be done or when it has to be done. So, this post will tell you all about nominees and how to ensure that your investments have nominees.

Who is a nominee?

A nominee is like a trustee. They will be entrusted with all financial accounts, assets and investments when you are no more in the world. Your nominee can be anyone who can handle the assets or investments in your absence. Nominees have the right to hold the assets/investments and can transfer the assets to your legal heirs.

People often get confused between beneficiaries and nominees. A beneficiary is a person who is entitled to receive his/her own benefit and the maturity benefits under an insurance policy. This means that the beneficiary is you and the nominee is someone you nominate.

Are nominees the same as legal heirs?

Nominees need not be the heir to your assets. However, if you want, the nominee can be the same person as your legal heir. This will be your legal heir as mentioned in the will or as decided by family hierarchy or succession laws. If as per the will, some other person has the rights to inherit your assets, the nominee will have to help transfer the assets to the legal heir. Suppose, for Mr A, his wife is the legal heir to his assets but his brother is the nominee. The nominee (Mr A’s brother) is not entitled to the assets and has to help transfer it to Mr A’s wife’s name.

The nominee rules

Various investments in India have their own set of rules when it comes to filling in nominees. Here’s a list of popular assets and how to register nominees for them.

Savings Bank Account

The nominee rules for a bank savings account or fixed deposit will come under Section 45ZA(2) of the Banking Regulation Act. This act says that the nominee has the right to receive the money from the bank account and the bank laws have nothing to do with succession laws. If the bank account holder has elected a nominee to date or has cancelled the name of a nominee, the account holder can submit the nomination using Form DA 1.

Where can you get this form? It will be available on the bank’s website. Details such as account holder’s name, address, the name of the branch, name and address of the nominee and deposit details have to be given. If there are multiple account holders for the account, all of them have to sign the form. You can nominate one person for an account. However, banks do allow you to choose different nominees for different accounts within the same bank.

Life Insurance

The Insurance (Amendment) Act 2015 has made it easier for policyholders’ dependents to claim insurance proceeds after the policyholder’s death. This amendment does away with chances of disputes among family members over the insurance benefits. Till 2015, nominees in life insurance policies could not be beneficiaries. They just received the insurance proceeds on behalf of the legal heirs of the insured. The Insurance (Amendment) Act 2015 has created a category called “beneficial nominee” where close relatives of policyholders can be the nominee as well as the beneficiary. Multiple persons can be appointed as nominees for your life insurance plan.

Public Provident Fund (PPF)

You can nominate one or more persons for your PPF account. If you have already nominated someone, you can use Form F to change or cancel a nomination. In case there is no nominee for a PPF account, the legal heirs of the account holder will get only Rs 1 lakh.

Apart from including nominees for your investments, you also should have a will. Read this post for more info – Why You Should Have A Will. This will help minimise disputes over assets.

Staff Writer

This article is written by RupeeIQ editorial staff.