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Have a nominee for your financial securities? Do you also need a will?

It’s often perceived that a nominee replaces a legal heir, however, a nomination by itself does not guarantee ownership. Given this situation, there is merit in thinking through the succession process for assets and bank accounts you own before any unexpected tragedy.

The relevance of having a nominee or a will is seen only in the event of ones untimely death. Hence, while one may not be able to see the impact of your choice, your loved ones will have to deal with the consequences. It’s often perceived that a nominee replaces a legal heir, however, a nomination by itself does not guarantee ownership. Given this situation, there is merit in thinking through the succession process for assets and bank accounts you own before any unexpected tragedy. 

Nomination takes you half way

It’s a simple process to add a nominee to your MF holding. It can be done by filling in the nominee details at the time of making an investment or even added through simple documentation at a later stage. Whether you invest via a physical form or online, the facility will be available for you. You can nominate anyone you trust or even a minor. 

But what does it mean to nominate a person? The nominee is considered a trustee or someone who minds the investment post death of the investor. While, it will transfer the right to be a caretaker of the asset in the event that the owner dies, it does not automatically make the nominee the new owner and is not a substitute for a legal will where it exists. If there is a joint holder, then ownership will remain with the joint holder rather than getting passed on to the nominee. 

It’s a good idea to have a will and add your MF holdings with specific details onto that will. It creates clarity on transfer of ownership of the MF schemes. The statement in a will overrides the nomination and removes the confusion. 

Also, as a trustee, the nominee is expected to enable the transfer of units to the legal heir (on claim). Of course, if the nominee and legal heir are the same, it won’t matter. However, in cases where the nominee is not a legal heir or there exists a legal will with a different transfer summary, matters can get tricky. The nominee’s claim of ownership can be contested by legal heir(s) in court. Hence, a nomination does not automatically supersede statements in a will or where there is no will, the rights of legal heirs. 

Where there is a will, there is peace

A will is a statement made by you on how you want your assets distributed in case of your untimely death. It’s a good idea to have a will and add your MF holdings with specific details onto that will. It creates clarity on transfer of ownership of the MF schemes. The statement in a will overrides the nomination and removes the confusion. 

One way to approach this is to make your legal heir or the one you want to pass on your assets to, the nominee on your application. Given that minors can be nominees too, you can add the names of your children as well. It is easier to add a nominee than create a will which, requires a lot more detailing. Moreover, preparing a will is not a frequent activity; you might make one which doesn’t get updated for years. However, your investments may be increasing every month or changing every year. Hence, even along with a will, it is a good idea to add a nominee against your investments, preferably add the person you would want to inherit your wealth as the nominee. You can have more than one nominee for an asset as well. 

In both cases though, there is a need for documentation like death certificate, identity proof and so on to get the MF ownership transferred. Make sure you enable a smooth transition of your assets to your loved ones, combine both nomination and a formal will for the best outcome. 


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