ARTICLES

What is a Nomination? 

You must have heard about the word Nomination. In financial terms, Nomination means an individual who can claim the proceeds of investments after the demise of the original investor. 

For Example, Shivani applies for Mutual fund investment. While applying she mentions her daughter’s name as the nominee. This means that in case of an unexpected event, her daughter will be the holder of a Mutual fund. 

A nomination is required in Insurance, Bank Locker, Fixed Deposit, Postal Schemes, Bonds, Broking Account and other financial Instruments if any.  
Who can be a Nominee? 

Nominees can be anyone in your family, like your parents, children, spouse, siblings, etc. A nominee is a person who receives the proceeds of investments in case of the death of the Investor.

Why is it important?

Let’s understand this by example:
Sameer is having investments in Fixed Deposits and Mutual funds. While filling up application forms for FD and Mutual funds he left the Nomination part blank. He thought it is not necessary to fill so he left it blank.

If Sameer is the only one who manages the finances of the family, then it becomes difficult for the family to know where his investments are made. And in uncertain times the family members will find it difficult to cope up with their loved one’s loss and to manage the home. 

In case of the absence of the Nominee’s name in investments, the process of receiving investments in the legal heir’s name requires lots of documents like a succession certificate, a will or court order, etc. It becomes difficult to get hold of all the documents while going through a loved one’s loss. Therefore, it is suggested to have nominations in all your investments. 

“Commercial banks have Rs.14578 crores as unclaimed deposits in 2018 as against Rs. 11494 crore in 2017. The country’s largest insurer, Life Insurance Corporation (LIC) alone holds 12892 crores as unclaimed deposits.” - Economic Times, July 2019 

This huge amount remains unclaimed mainly because investors had not mentioned the nominees. Mentioning a nominee is a simple task, it only required you to add the name, mention your relationship and their contact details. 

Some of the investment instruments are making nominations compulsory in the case of single holding investments.
Tips:  
1.     Some Investments can have multiple nominees also. You are also supposed to give a % to the allocation given to each nominee, if you haven't mentioned % then Proceedings will be divided equally amongst nominees.
2.     Make sure to mention the full name of the Nominee, Age, Address, and your relationship with the nominee
3.     If nominee is a minor then mention Guardian’s full name, age, address and relationship with nominee
4.     If you have not mentioned a nominee in your present investments, then you can have Nominees registered now also. There are separate forms available for it. Also, you can change your nominations.