<p>We keep hearing from our friends and relatives about their harrowing experiences while claiming the benefits in various investments of a deceased person who had not done any nomination. Would it not have been prudent had the deceased person nominated some person when he was alive so that all this running from pillar to post would have been saved?</p>.<p>But what is a nomination? Nomination is a facility by which an individual having savings or fixed deposits in a bank, units in mutual funds or a life insurance policy nominates a person to receive the benefits in the event of his death. A nominee is not the rightful owner or the legal heir of the assets but only holds them in trust in the event of the death of the asset holder. Nomination only facilitates and expedites the process of transfer of the assets of the deceased and is critical in succession planning. If there is no nomination in investments, the legal heirs will have to produce many documents like a succession certificate, court order or indemnity bond to prove their claim as legal heirs and the process can be tedious and time-consuming. Since the process of nomination is different across different investments let us try to understand them in the following paragraphs:</p>.<p class="CrossHead"><strong>Nomination in bank account</strong></p>.<p>Nomination in a bank can be made in case of a Savings account or a Fixed Deposit by the account holder or hirer of a safe deposit locker or the persons availing of safe custody facilities. However, you can nominate a person only in your personal capacity and not in any representative capacity such as an attorney or mandate holder. Also, the nomination can be done in the case of one person only. That said, the nominee can also be a non-resident Indian.</p>.<p>You can also request the Bank to record the name of the nominee in the passbook if you so wish otherwise the Bank will merely mention that ‘Nomination has been Registered’. This can be done in the case of FD receipts also. Another aspect is that if you have many FD receipts you can have different nominees for them but not more than one nominee per FD. You can register for nomination either at the time of opening the account or subsequently at any time. You can also cancel or change a nominee at any time.</p>.<p class="CrossHead"><strong>Nomination in mutual funds</strong></p>.<p>As the savings pattern of families in India is changing an increasing number of individuals have started investing in mutual funds - as reflected in the increasing number of folios and the exponential increase in Assets Under Management (AUM) to Rs 36 lakh crores (as of 31 August 2021) - nomination becomes important. An investor, called a unitholder, can nominate up to three persons in a single folio and indicate the percentage of allocation for each of them. The nominee details like name, address, relationship and the percentage of allocation etc. have to be filled up by you in the relevant section of the Common Application Form (CAF) at the time of investing. If you are investing through your Demat account, there is no need to bother about this part as the nominee mentioned in the Demat account will be the nominee for all your investments. Adding or modifying existing nominees can also be done online or by visiting the nearest investor centre of the AMC.</p>.<p class="CrossHead"><strong>Nomination in life insurance policies</strong></p>.<p>The nominee in a life insurance policy gets the sum assured and not the total of premiums paid, unlike other investments. A nomination becomes critical as the benefits can compensate for the financial loss at least and life goes on for the dependents of the deceased. A policyholder can nominate his entire family or even others who are not be related to him. However, after the changes in Insurance Laws (Amendments) Act, 2015, if an immediate family member such as parents, spouse or children has been made nominee, then they will be called as beneficiary nominees. The insurance company will pay the sum assured only to the beneficiary nominee(s) and not to other legal heirs.</p>.<p class="CrossHead"><strong>Nomination in Demat accounts</strong></p>.<p>Since the account holder in a Demat account can hold many equity shares & different securities like bonds & debentures, the nominee will be the nominee for all of them & the procedure for transfer (called transmission) of securities from the Demat account of the deceased to the Demat account of the nominee becomes easy. You can nominate up to three individuals in your Demat account.</p>.<p>So, what is stopping you? Go ahead and exercise your right of nomination in all your investments if you have not done so far.</p>.<p><em>(The writer is a CFA and a former banker and currently teaches at Manipal Academy of BFSI, Bengaluru)</em></p>.<p><strong>Check out the latest videos from <i data-stringify-type="italic">DH</i>:</strong></p>
<p>We keep hearing from our friends and relatives about their harrowing experiences while claiming the benefits in various investments of a deceased person who had not done any nomination. Would it not have been prudent had the deceased person nominated some person when he was alive so that all this running from pillar to post would have been saved?</p>.<p>But what is a nomination? Nomination is a facility by which an individual having savings or fixed deposits in a bank, units in mutual funds or a life insurance policy nominates a person to receive the benefits in the event of his death. A nominee is not the rightful owner or the legal heir of the assets but only holds them in trust in the event of the death of the asset holder. Nomination only facilitates and expedites the process of transfer of the assets of the deceased and is critical in succession planning. If there is no nomination in investments, the legal heirs will have to produce many documents like a succession certificate, court order or indemnity bond to prove their claim as legal heirs and the process can be tedious and time-consuming. Since the process of nomination is different across different investments let us try to understand them in the following paragraphs:</p>.<p class="CrossHead"><strong>Nomination in bank account</strong></p>.<p>Nomination in a bank can be made in case of a Savings account or a Fixed Deposit by the account holder or hirer of a safe deposit locker or the persons availing of safe custody facilities. However, you can nominate a person only in your personal capacity and not in any representative capacity such as an attorney or mandate holder. Also, the nomination can be done in the case of one person only. That said, the nominee can also be a non-resident Indian.</p>.<p>You can also request the Bank to record the name of the nominee in the passbook if you so wish otherwise the Bank will merely mention that ‘Nomination has been Registered’. This can be done in the case of FD receipts also. Another aspect is that if you have many FD receipts you can have different nominees for them but not more than one nominee per FD. You can register for nomination either at the time of opening the account or subsequently at any time. You can also cancel or change a nominee at any time.</p>.<p class="CrossHead"><strong>Nomination in mutual funds</strong></p>.<p>As the savings pattern of families in India is changing an increasing number of individuals have started investing in mutual funds - as reflected in the increasing number of folios and the exponential increase in Assets Under Management (AUM) to Rs 36 lakh crores (as of 31 August 2021) - nomination becomes important. An investor, called a unitholder, can nominate up to three persons in a single folio and indicate the percentage of allocation for each of them. The nominee details like name, address, relationship and the percentage of allocation etc. have to be filled up by you in the relevant section of the Common Application Form (CAF) at the time of investing. If you are investing through your Demat account, there is no need to bother about this part as the nominee mentioned in the Demat account will be the nominee for all your investments. Adding or modifying existing nominees can also be done online or by visiting the nearest investor centre of the AMC.</p>.<p class="CrossHead"><strong>Nomination in life insurance policies</strong></p>.<p>The nominee in a life insurance policy gets the sum assured and not the total of premiums paid, unlike other investments. A nomination becomes critical as the benefits can compensate for the financial loss at least and life goes on for the dependents of the deceased. A policyholder can nominate his entire family or even others who are not be related to him. However, after the changes in Insurance Laws (Amendments) Act, 2015, if an immediate family member such as parents, spouse or children has been made nominee, then they will be called as beneficiary nominees. The insurance company will pay the sum assured only to the beneficiary nominee(s) and not to other legal heirs.</p>.<p class="CrossHead"><strong>Nomination in Demat accounts</strong></p>.<p>Since the account holder in a Demat account can hold many equity shares & different securities like bonds & debentures, the nominee will be the nominee for all of them & the procedure for transfer (called transmission) of securities from the Demat account of the deceased to the Demat account of the nominee becomes easy. You can nominate up to three individuals in your Demat account.</p>.<p>So, what is stopping you? Go ahead and exercise your right of nomination in all your investments if you have not done so far.</p>.<p><em>(The writer is a CFA and a former banker and currently teaches at Manipal Academy of BFSI, Bengaluru)</em></p>.<p><strong>Check out the latest videos from <i data-stringify-type="italic">DH</i>:</strong></p>