Why You Should Always Choose A Nominee

When you apply for a bank account or an investment, you need to fill up a form in which there is a section on adding ‘nominee’. This holds true for all financial instruments, be it a bank account, a bank locker, an insurance policy, or anything else. Many people leave the section blank. Ideally, the nominee section should be filled. To drive home the importance of giving nominee details, the Reserve Bank of India (RBI) has recently roped in superstar Amitabh Bachchan. In a video, the actor is seen asking people to add nominee details, which helps in handing over the funds in the bank account to the right person. RBI’s Twitter post reads: “Do register a nominee in your bank account/locker. It enables easy settlement of claim of depositors” 

Why Is It Important To Make Nominations? 

The nominee is the trustee you appoint to ensure your assets are passed on to your heirs. The nominee collects the assets from the bank or some other financial entity such as a fund house, and apportions it to your heirs based on your instructions. It is important to remember that the nominee is not necessarily the person who is entitled to the asset but only the trusty for the same. So, unless there's a Will stating clearly that the nominee is also a beneficiary or heir, or if there are no other heirs, the nominee may not be entitled to the money or assets. 

“Having a nominee means that on a person’s demise, the accounts of the depositor are easily accessible to the family. The bank will entrust the deposits to the nominee. In the absence of nomination, the process can become lengthy and complicated,” says Adhil Shetty, CEO of BankBazaar.com, a financial services website. 

The primary misconception is that the nominee is also the heir to the asset. “The nominee is only the trustee of the assets and in the absence of a Will specifying that the nominee is also the sole heir to the assets, the other legal heirs can make a claim to the asset. The only exception is in case of insurance, where the nominee is also the beneficiary,” adds Shetty. 

What Happens When Nominations Are Not Made? 

The nominee is the person designated by the depositor to act as his or her trustee. In the absence of nomination, several things come into play. If the account is held jointly as either or survivor, then the survivor may claim the deposit. If it is held as a joint holding, then the bank will usually give the funds jointly to the surviving holder and the legal heirs of the deceased.

“If the account has a single operator, then the heirs may have to present the Will of the deceased to state their claim on the asset. In case the deceased died intestate, then the bank may be willing to deliver the assets to the legal heirs on the basis of indemnity-cum-affidavit, if there is no reasonable doubt about the genuineness of the claimants. In this case, all the legal heirs making the claim will have to jointly submit an indemnity to the bank,” says Shetty. 

In all cases, the claimants have to make an application and submit it along with a copy of the death certificate of the account holder, the claim form, and the address and ID proof of each claimant. If there are multiple heirs and the assets have to be transferred to only one of them, then the other heirs will have to sign a letter of disclaimer, relinquishing all rights to the assets in favour of the claimant.