Hyderabad: Those who have taken any financial decisions to invest or take a loan, they would have put a nominee. A nomination, in case of an untoward incident were to happen to the investors, will insure that the proceedings fro the savings, insurance or a home will go to the designate person. In absence of this, there is a circuitous route to be taken to avail the benefits.
Importance of updating nominee
Most investors when they start their investments in saving bank accounts, mutual funds, fixed deposits, insurance and other instruments make a nomination. If investments happen before getting married, the nominees, in many cases, are parents. In many cases the nominee details are not updated, even after the demise of parents. This makes it a difficult task for the beneficiaries to claim benefits. They might need to prove their right through a legal heir certification.
Nominee Vs Legal Heirs
Investors perceive nominee can own get all the benefits. However, nominee is just a custodian, on whom lies the responsibility of ensuring that legal heirs of the depositor/investor get the money/benefits from an investment. There may be times when nominees and the legal heirs are same. The claim of a legal heir supersedes that of the nominee. A legal heir is a person defined by a will and testament as the person who should receive the benefits, like money from investment, explains Sai Krishna Pathri, Certified Financial Planner, MoneyPurse.
Why banks ask a nomination
Bank or an investment company’s responsibility ends with paying out the investment proceeds to the stated nominee. If a nominee is named, then it money goes to the nominee else to a proven legal heir. Once the invested amount is handed over to the nominee, its distribution is the responsibility of the nominee and not of the bank or investment company.
Making a will
To ensure there are no disputes or to ensure that the benefits go to the intended person, a will has to be made. Contrary to assumption, making a will is simple. The provisions of a will prevail over nomination. In other words, if you want to ensure that the nominee gets the benefits, mention them clearly in the will. If no will is created, legal heirs may be decided based on prevailing laws of inheritance in India like the Indian Succession Act,1925, Hindu Succession Act, 1956 or the Sharia Act,1937 or others.
A will is always revocable during the lifetime of the testator. On the other hand, a will is not enforceable if a person has unsound mind at the time of making a will. A will obtained by force or one made under influence of intoxication is also not enforceable.
If there are no instructions about what is to be done with the investments in the event of death, the bank/investment company will try and get in touch with someone related to the deceased deposit-holder. In case no one can be reached, it reinvests or parks the money till such time as someone claims it. If someone makes a claim, they will be asked to prove their relationship with the depositor before getting access to the funds.