Get a Will — Your Nominees are not your legal heirs

The differences between a Will and Nominee are massive, and your nominees may not always inherit your assets.

Before I tell you the difference between a Will and a Nominee, Lets start with a small story.

Mr. Suresh died recently due to a sudden illness. As his only son was settled, he had wanted to make sure that his wife was the sole owner of all his monetary assets. This included his insurance policy and mutual funds. So during his lifetime, he nominated his wife as a nominee in his term insurance policy and mutual funds investments.

Who do you think is the rightful owner of all the assets?

If you thought that since he nominated his wife, she would get all the assets, You are mistaken.

Though his wife was the nominee in all his movable assets, as per law, his wife and his child were the legal heirs, and both had equal right to his assets.

If Mr. Suresh wanted to make sure only his wife inherited his assets, he should have written a Will.

Let us first understand the legal definition of a Will and a Nominee.

What is a Will?

A Will means the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death. A legal heir will be the one whose name is provided in the Will.

In absence of a Will, the legal heirs of the assets are decided according to the succession laws.

A Will is the ultimate source of truth and replaces the succession laws.

What is a Nominee?

A Nominee means a person or entity who is requested or named to act for another, such as an agent or trustee.

In other words, a nominee only works like a caretaker of assets and is legally bound to transfer it to the legal heirs. For nearly all assets class, a legal heir is entitled to the deceased’s assets and not nominee.

Why do we need Nominee?

So you must be wondering that if the nominee does not become the sole owner, then why bother about nomination at all? The reason here is when you die, you want to make sure that Insurance Company or any other such assets should go to someone of your trust and in turn help legal heirs.

Is the concept of Nominee valid for all assets?

The answer is surprisingly no. In case of Shares, anyone who has been nominated by you will be the ultimate owner of the stocks. But if you have made a Will, that will be the source of truth and not succession laws on inheritance.

“A reading of Section 109(A) of the Companies Act and 9.11 of the Depositories Act makes it abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights thereunder in the nominee upon nomination validly made as per the procedure prescribed, as has been done in this case.”

Conclusion

In normal course of life, we assume a lot of things as too obvious but legally it can give us a shock. The differences between a Will and a Nominee is one such example. This can be harmful for us. Hence it is advised that one needs to execute a Will if they wish for the legal implications of one’s passing to be a smoother and easier process for their loved ones.

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