ARTICLES

Correlation between Nomination and Will

You toil hard and create assets for your loved ones so that after your demise, they can be financially taken care of. But what happens to such assets after your demise? Are they rightfully passed on to your legal heirs? 

Estate planning is an important activity that you must undertake to ensure that your assets and property are distributed among your loved ones when you are not around. One of the most important aspects of estate planning is creating a Will. 

What is a Will?

A Will is a legal document that outlines the distribution of the assets of an individual after his/her death. You can make a Will anytime that you want and also change the Will over your lifetime. However, after death, the Will becomes the most important document based on which your property would be distributed. 

What is a Nomination?

Nomination is the process of selecting that individual who would be able to take of your assets after your death. Nominees act as trustees of your assets and they help in passing your assets to your legal heirs after your demise.

Difference between Will and Nomination

The Will supersedes nomination. It defines the beneficiaries of your property. Nomination, on the other hand, is just creating a Trust for holding your assets. Nominees might not be the beneficiaries who are named in the Will. If you have made the Will and the nominee is not mentioned therein, the nominee would just be a conduit for the transfer of your property. He/she would not be the legal owner or user of the same.

For example, say you nominate Mr. X to receive the benefits on your death. However, in your Will, you state that your wealth should be distributed between A and B who are your legal heirs. In this case, after your demise, Mr. X would receive your property from different avenues wherein you invested them. However, Mr. X would not be the owner of the property. He would simply help in collecting and, then, distributing your property to A and B.

Why is nomination important even when you have a Will?

Even though you have created a Will which determines how your assets would be distributed, having a nominee is important. It is because, in the absence of a nominee, your investments would be paid to your legal heirs. Your legal heirs would have to provide proof of ownership, proof of relation, legal probate, succession certificate, etc. to establish their ownership over your assets. These documents would have to be provided for all avenues wherein you have invested. 

A report of the PTI has confirmed that as of 31'st March 2018, Rs 15,167 crore was lying with all the 23 insurers as unclaimed money which needs to be paid to the policyholders, nominee, etc. The primary reason for this unpaid claim money is a lack of communication details and nomination. (Source: ET)

For example, if you have invested in 10 different mutual funds, your legal heirs would have to furnish a set of documents for each mutual fund folio. This is a tedious task that involves a lot of time and energy. On the other hand, if you have appointed a nominee, your nominee would be able to collect all your investment proceeds. Thereafter, as per your Will, the property can be distributed among your loved ones.

So, always identify a nominee to receive your property even when you have a Will. The nomination makes the settlement of claims easier and is recommended. 

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