What is meant by nomination?
You are filling up the form to open a bank account. The bank asks you for a nominee. You must have noticed this even when you fill up the form of your life insurance policy or when you open a new demat account to buy and sell shares.
What is nomination?
Nomination is an instruction given to a bank or a financial services provider where the money in your savings and fixed deposit bank accounts, post office schemes, The death benefits of a life insurance policy, The ownership of shares in your demat account or the ownership of your mutual funds passes on to the person whom you nominate.
The nominee is not the owner of these investments or the inheritor of this money.He is just a caretaker (who protects the interests of your heirs) making sure your money reaches your heirs (family and children).
Nominee’s can be family members, spouse, friend’s relatives, children or an unrelated party.You have to fill in the name of your nominee, his age and relationship to you.
Is a nomination greater than a will?
A will states how your wealth is distributed among heirs and family. Who gets how much? It is greater than a nomination and is the final word.
Your nominee is just a caretaker (Makes sure your wealth reaches your heirs and family).
If you die without making a will then the rules of the country governs how your wealth will be distributed based on your religion.Your nominee still plays the care taker role making sure the wealth reaches the parties as decided by the country.
Nomination of a life insurance policy:
On the death of the insurance policy holder the death benefits (sum assured or the maturity benefits) pass on to the nominee.The nominee is just the caretaker of the money got from the insurance policy. He has to pass on the money to the heirs named in your will.
If there is no will the money goes to those decided by the country as per laws of succession based on religion.
Nomination of a public provident fund:
You have to mention a nominee when investing in a PPF. The nominee transfers your money to your legal heirs on your death.If there is no nominee the legal heirs get only a sum of INR 1 Lakh from the proceeds of the PPF.
On submission of proof showing they are the legal heirs they can withdraw the rest of the money.
Nomination of an employee provident fund:
You have to appoint a nominee for the money in your employee provident fund account.
This nominee has to be a family member unless you do not have a family.
After marriage your spouse and children become the nominee to the money in the EPF.
Nomination of a demat account:
A demat account may have 2 joint holders. If one of the owners of the account die the other holder becomes the owner of the shares in this account.If both the owners die the nominee becomes the owner of the shares in the demat account.
If there is a legal heir named in the will he becomes the owner of the shares in the demat account and the nominee transfers the ownership to the legal heirs.
In the absence of a will the nominee becomes the owner of the shares held in the demat account. (No claim is entertained by the heirs under country laws based on religion).
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