Do nomination on your investments

A person gets so busy in earning, enjoying and investing that in some cases s/he forgets one of the important things to do — Nomination of investments.

What is nomination? Why is it important and what are its benefits? Who can nominate? What guidelines to be followed when completing a nomination form?  Whom can I nominate? Can I nominate a minor? 

Nomination is the process of declaring in advance the name of person/s who will have access to your balance with banks, mutual funds and insurance companies.
When customers open their accounts or make deposits, banks ask the holders to make nominations which mean they should name persons to whom the money lying in their accounts should go to in the event of their death.

If you have nominations in all your financial accounts such as banks, mutual funds, demat, insurance policies etc., the respective banks, fund houses, the insurance companies would easily dispense the proceeds to the nominee/s upon submission of the requisite documents like death certificate of the account holder, proof of ID of nominee/s, declaration of indemnity (wherever required) in regard to claims.

All the banks depositors, mutual fund and stock investors, insurance policy-holders, PPF and PF etc. can nominate. Ideally, all investment assets accept ‘nomination’. 

The significance of doing nomination is strengthened by the recent regulatory requirement which makes it mandatory for a person investing in mutual fund to mention their nominee details. In PPF deposits, in the absence of nomination, legal hairs can only claim part of the proceeds. Each time you invest your money, you are given the option to nominate.

The moment you have some financial asset, nomination is advised.  If parents have not done so, tell them to do it too.

Nomination vs. Will
Nomination vests the ownership rights on to the nominee. However, if there is a Will, the contents of the Will shall prevail over nomination. Nomination is the financial institution’s own and immediate process. Will, on the contrary, is a personal document.

Life insurance:
The purpose of life insurance is to ensure that your loved ones are protected financially if anything untoward happens to you. If you don’t make a nomination in your insurance policy, the insurance company is not obligated to release the sum assured until your loved ones obtain succession certificate or a Grant of probate. 

Though a Will would name the beneficiaries who would be entitled to the funds post-death of an account holder, it is, nevertheless, time-consuming entailed in legal formalities.  A family which would already be torn apart due to the loss of near and dear would not want to be involved in these hassles. However, a nomination enables faster disbursement of claims.

As far as stocks are concerned, nominations can override if there is no Will.   
You can change the nominee anytime, any number of times. You don’t have to inform the earlier nominee about the change. A minor can be nominated, but must be accompanied by a guardian.

At times, the Will and nomination could clash. You could nominate someone as a nominee for your deposits but write a Will saying the proceeds from all your investments go to someone else.  You could also decide to change the nomination for a bank deposit or insurance policy but forget to change in your Will.

In short, lack of nomination for financial assets implies lack of responsibility.

Is nomination a final document?  
If I write a clear Will for all my assets, should I still go for nomination? Irrespective of whether you write a Will or not, you should go for nomination, in order to get the financial institutions to hasten the transfer of proceeds to the nominee.
While filling up the application/nomination form, mention clearly the name, age, address, relationship of the nominee so as to avoid any hardship at the time of settlement of claims.

However, it is to be noted that nominee need not be the legal heir and the nominee would be receiving the stock/balance from the bank as a trustee of the legal heirs.
Writing a Will is advised to remove any ambiguity, though. Make sure your Will does not differ from your nomination, as Will over-rides nomination.

(The writer is a former banker)