The Most Authentic Guide on Personal Finance and Investments


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Nomination is not a Will

You are well aware of the nomination facility available for your various assets.

It is provided by banks, post office, mutual funds, PPF, housing society etc., for easy and quick transfer of your money and property to your nominee, after your death.

However, you may not be aware that…
… this does not make the nominee the “owner” of such assets.

In other words, in the eyes of the law, a nominee is merely a caretaker or trustee of your assets. 

Therefore, s/he is under the obligation to transfer all your assets, be it property, money, etc., to 
a) your successor(s) as written by you in your Will;
b) and if there is no Will, then to the successor(s) decided as per the applicable laws.

Of course, it is quite likely that the nominee may also be your legal heir and ultimately the assets may be transferred to him/her. But that is a separate issue. Nominee will be seen as the caretaker, until the law makes him/her the legal owner.

Therefore, unlike many, don’t be under the wrong impression that once you have nominated someone your job is done. No, that could turn out to be quite serious.

Suppose there is a dispute among your family members. Then, the Court of Law will NOT take your nomination into cognizance. It will be guided purely by what you have written in the Will or the Laws of the land, as the case may be. 

Unfortunately, given the plethora of laws, deciding upon the legal heirs, often becomes a complicated and acrimonious affair.

This is so because, apart from the law framed by the Govt. of India in this regard, various personal laws also have to be taken into consideration. 

The following are the laws that govern the Wills and the Succession of the assets:
-  The Indian Succession Act, 1925
-  The Indian Registration Act, 1908
-  The Hindu Succession Act, 1956
-  Hindu Personal Laws
-  Muslim Personal Laws

Of course, the basic idea underlying under all these laws is 
i.   to identify your heirs,
ii.  list them in the order of preference, on the basis of proximity of relationship, and 
iii. then decide on the percentage share that each of the heirs would get.

However:

Given the different personal laws, your family members who are eligible to become legal heirs, are different. So Hindus will have different legal heirs from Parsis; Muslims will have different legal heirs. This get further complicated when there is inter-caste marriage.

To make the matter worse, there are (or were) a few exceptions to the above rule that nominee is only a caretaker and not the owner. Read : 'Legal heir vs nominee battle gets murkier'.

To avoid all these needless legal issues, you must write your Will; and not just depend on Nomination to pass on your assets to your near and dear ones.

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