“If you go through life being casual, you will end up being a casualty” – Les Brown
Indians are known for their love for Gold and Real
Estate. It is often taken for granted
that after death, the same will be passed on to the loved ones. The harsh reality of life is that life is not
that simple. Legal systems are surely
not simple. It is not only important for
us, but we are duty bound to ensure that our assets or funds are transferred to
our loved ones smoothly. As mentioned
earlier, this is also because the legal hassles are complex and time
consuming.
People are often confused between Nomination and Will. It is therefore important for us to
understand the basic difference between the two.
Let us start with the general mis-conception. Most people believe that if there is a
nomination in place for all the investments, there is no need for a will. Let us understand the fact – Nomination is
merely a right to receive or hold the assets or funds. It is not a right to own.
Typically, the purpose of appointing a nominee is to have
someone trustworthy and responsible to handle assets after nominator’s
death. Nominee cannot sell the assets
unless he/she is a legal heir. In case
of nominee being a minor, the nominator needs to appoint above the age of 18
who can legally receive the proceeds in the event of nominator’s death.
Will on the other hand enable the person to choose who gets
the property / assets after his/her death.
Naturally, this comes into effect post the death of the owner.
Let us understand a case.
Mr. X has a life insurance policy, and had made his brother
Mr. Y as the nominee for his insurance policy.
Unfortunately Mr. X died and in his will, he expressed his desire to
pass on the benefit to his wife (a legal heir).
While the insurance company will pay the life cover proceeds to the
nominee (Mr. Y in this case) but the nominee can only receive the funds and not
use it. Nominee cannot use the funds
received as he is only the trustee of the funds and not a legal owner of the
funds. In absence of a will, the funds
or assets will be distributed as per the Indian Succession laws.
Only in case of equity shares, Nomination is the final right
to receive, hold and own in case of absence of a will.
Let there be no confusion – both nomination as well as Will
are essential. This is largely because:
- Nomination helps in smooth transfer of funds from certain investments, banks or financial institutions, to the nominee (of the deceased person).
- Will helps in ensuring the smooth transfer of funds / assets to the legal heir as per the wish of the deceased person.
Nominee and the beneficiary under the will can be the same
person too.
The absence of the above mentioned mechanism often leads to
the hassles of going through the tedious process of providing death
certificates, proof of relations, probate, management of other family claims,
etc. One must think through all the
possible hassles (including legal issues within the family) in absence of
proper planning around such succession.
To sum up-
- Nomination as well as Will have their respective merits.
- It is always advisable to have nomination in place, particularly for financial investments.
- Irrespective of the age, one should make a Will at the earliest. A will can be changed several times if required or desired.
- A Will should be carefully drafted to handle various scenarios arising out of multiple nominees within the family.
The position of the nominee has often been the matter of
substantial litigation. For the purpose
of keeping this article conceptual, exact references of case studies and more
importantly – court judgement are not referred to.
It is not a matter of IF you should have a Will. It’s When?
The clear answer is NOW.
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