If you have been reading my blog posts on the subject of nomination, you would have noted that a legal heir is 'legally' superior to the nominee.
In other words, ownership of the assets of a deceased person is legally transferred, either
- to the persons named in the Will, or
- in the absence of a Will, to the legal heirs i.e. spouse, children etc. as per the applicable succession laws (primarily determined by his/her religious identity).
Nominee named in any asset is only to act a trustee of that asset.
He must
a) receive the asset from the institution concerned i.e. bank, insurance company, post office, mutual fund etc. and
b) transfer the same to the person(s) identified by the court to be the new legal owners.
This has been the law... with equity shares being the only exception. If there was no Will, the court had taken a view that nominee becomes the legal owner of such shares upon death of the original shareholder. Legal heir has no right over them.
Of course, no law is simple and straightforward. A good lawyer can always play around with the words. Therefore, given the human greed, there have been numerous legal battles where the nominees claim to be the legal owners and have refused to transfer the assets to the next of kin such as spouse, children etc.
Two recent development only add fuel to the fire.
One pertains to the life insurance policies, wherein IRDA has introduced the concept of "beneficial nominees". I had discussed this in my blog 'New nomination rules in life insurance perfect for our family'.
Briefly, henceforth when a life insurance policyholder nominates his parents, spouse and / or children, then they will be "beneficially entitled" to receive the insurance proceeds that become payable pursuant to the death of the policyholder. Even if other legal heirs make a claim on the Sum Insured, the insurance company will pay the same only to the said "beneficial nominees".
Thus, in life insurance policies certain specified nominees may now be superior to the legal heirs.
And the second development is actually the reversal of the earlier exception pertaining to the equity shares.
A recent judgement by the Bombay High Court overturns an earlier court judgement that gave the nominee the right to inherit the equity shares and not the legal heir. The judge has declared that the previous judgement was wrongly decided and should not be followed.
His order further specifies that the Companies and Depositories Act cannot take precedence over the laws of succession. In fact, the judgement affirms the Supreme Court's view that nominee is only a trustee appointed for convenience and cannot become the owner of such shares.
Needless to mention, you can avoid all the confusion, court cases and quarrels among your family and relatives by drawing up a Will. Since it supercedes all laws, rules and regulations, a clear and unambiguous Will will ensure an easy, efficient and expeditious transfer of your assets to your intended beneficiaries.
In other words, ownership of the assets of a deceased person is legally transferred, either
- to the persons named in the Will, or
- in the absence of a Will, to the legal heirs i.e. spouse, children etc. as per the applicable succession laws (primarily determined by his/her religious identity).
Nominee named in any asset is only to act a trustee of that asset.
He must
a) receive the asset from the institution concerned i.e. bank, insurance company, post office, mutual fund etc. and
b) transfer the same to the person(s) identified by the court to be the new legal owners.
This has been the law... with equity shares being the only exception. If there was no Will, the court had taken a view that nominee becomes the legal owner of such shares upon death of the original shareholder. Legal heir has no right over them.
Of course, no law is simple and straightforward. A good lawyer can always play around with the words. Therefore, given the human greed, there have been numerous legal battles where the nominees claim to be the legal owners and have refused to transfer the assets to the next of kin such as spouse, children etc.
Two recent development only add fuel to the fire.
One pertains to the life insurance policies, wherein IRDA has introduced the concept of "beneficial nominees". I had discussed this in my blog 'New nomination rules in life insurance perfect for our family'.
Briefly, henceforth when a life insurance policyholder nominates his parents, spouse and / or children, then they will be "beneficially entitled" to receive the insurance proceeds that become payable pursuant to the death of the policyholder. Even if other legal heirs make a claim on the Sum Insured, the insurance company will pay the same only to the said "beneficial nominees".
Thus, in life insurance policies certain specified nominees may now be superior to the legal heirs.
And the second development is actually the reversal of the earlier exception pertaining to the equity shares.
A recent judgement by the Bombay High Court overturns an earlier court judgement that gave the nominee the right to inherit the equity shares and not the legal heir. The judge has declared that the previous judgement was wrongly decided and should not be followed.
His order further specifies that the Companies and Depositories Act cannot take precedence over the laws of succession. In fact, the judgement affirms the Supreme Court's view that nominee is only a trustee appointed for convenience and cannot become the owner of such shares.
Needless to mention, you can avoid all the confusion, court cases and quarrels among your family and relatives by drawing up a Will. Since it supercedes all laws, rules and regulations, a clear and unambiguous Will will ensure an easy, efficient and expeditious transfer of your assets to your intended beneficiaries.
