For most of us, securing our family’s future is a top priority. In addition to purchasing insurance and making investments, there is one more critical step in this: estate and succession planning to ensure that our family inherits our assets without delay, difficulty or confusion.
However, this aspect is often neglected due to the anxiety and discomfort that arise when contemplating unfortunate circumstances. It is necessary to overcome this and take the necessary measures. Even if it is a penny, it is important to make sure that it reaches the right person quickly.
Without estate planning, families may face lengthy legal disputes and financial hardship. The death of a person can cause great emotional shock and despair. In such circumstances, the dependents may not be in a position to prepare detailed documentation to claim funds belonging to the deceased person.
In this case, nomination can be a lifesaver. Among the many aspects of estate planning, such as wills, business succession planning, and nomination of financial assets, the simplest and most basic aspect is nomination.
A nominee is the person designated to receive and take over another person’s financial assets after his or her death. The nominee can be, and usually is, someone in the person’s immediate family, such as a spouse, children, parents, or siblings.
To understand the importance of designation, let us consider the case of bank accounts and deposits. If the holder of a deposit has designated a representative for these, after his death, the representative can simply request a transfer of funds to his account by presenting the death certificate of the deceased person and the representative’s identity documents.
If no candidate is specified, the bank will require the claimant to submit a number of documents such as a will, legal heirship certificate, succession certificate and no-objection certificate from other legal heirs, all of which could take at least a few weeks, if not months, to obtain from the respective authorities.
The testator is not always the ultimate beneficiary. In such cases, the bank pays the testator, who acts as a trustee and holds the deceased’s funds on behalf of the legitimate heir until the money or assets come to him or her according to the laws of succession or testament.
The nomination serves a very important function: to make the funds immediately available to the person to whom the account holder has entrusted them. Therefore, it is very important to carefully choose the nominator and clearly specify this with the bank.
Nomination should also be reviewed as life circumstances change. While a will ensures that there are no legal disputes within a person’s family, nomination ensures that someone in the family receives the funds immediately.
The same is true for insurance policies. Designating a nominee ensures that the intended beneficiaries get the benefits of the policy. In the field of insurance, the insured can designate more than one nominee and specify the percentage of the benefits to be allocated to the respective nominees.
While the beneficiary is the person who is entitled to receive the benefits of the policy, the nominee is the person who is in charge of receiving the benefits on behalf of the beneficiaries. The nominee can be the same person as the beneficiary or legal heir, and usually is. But if the nominee is a minor, a guardian must be named.
If someone other than a family member is chosen as the nominee, the insurance company’s approval may be required. Insurance laws also allow for the selection of successive nominees, i.e., persons chosen by the nominees themselves to receive the benefits of the policy in the event of their death.
The proposed amendments to the banking laws tabled in the Lok Sabha would allow up to four nominations for bank accounts and successive nominations, similar to what happens with insurance. This is expected to make estate planning easier and clearer as nominations can be made for all legal heirs.
Aligning the nomination with what a person would have or has entered into his or her will makes the probate process conflict-free, gives peace of mind to the person and certainty to his or her legal heirs.
Usha Ganapathy Subramanian is a company secretary in Chennai. Dr Ranjith Krishnan is a sustainability consultant in Thane.
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