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Three things to keep in mind when filing nominations for financial assets

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All your efforts to secure your family against financial uncertainties in case of your demise can come to nought if you don’t file your nominations properly. Your loved ones may end up going through a time-consuming process and a tedious process to claim your assets after your demise. A nominee is the safe-keeper of the assets in case of the demise of the owner. We tell you some of the important things to keep in mind when filing a nomination.

Choose carefully

The nominee is only a custodian or trustee, and not the owner of the assets in most cases. A nominee is legally bound to transfer the assets to the legal heirs. There are many cases where legal heirs have approached courts to direct the nominee to hand over the assets to them. Courts have often ruled that the nominee is a trustee and a custodian and it’s the legal heirs who should inherit the assets.

Legally, anyone can be a nominee, but it’s advisable to have close family members and legal heirs as nominees. “The nominee and the legal heir should be the same person to avoid any potential dispute,” said Gautami Gavankar, executive director, trusteeship services, Kotak Mahindra Trusteeship Services Ltd.

A nominee may also need to hold the assets indefinitely if no legal heirs claim it, says Varghese Thomas, Partner, J Sagar Associates. The law doesn’t prescribe any time by which legal heirs can claim the assets. According to lawyers, the law of limitation does not apply when someone holds the assets as a trustee.

Things could be different if the nominee is also one of the legal heirs. “If other legal heirs don’t act in a reasonable time, the nominee is entitled to presume that they have relinquished their right. The asset will exclusively belong to the nominee in that event,” said Mukesh Jain, corporate lawyer and founder of Mukesh Jain and Associates, a Mumbai-based law firm. The definition of a “reasonable time” varies, and the court will take a call based on the facts of the case.

Avoid Mistakes

Although filing nomination seems like a simple exercise but even a spelling error can create problems for the family members while claiming the assets. “Sometimes people make mistakes in writing the correct names of the nominee.If it does not match with the KYC documents of the nominee, it may lead to disputes and delay at the time of payment,” said Gavankar.

The details of the nominee such as name, address, date of birth and relationship with the deceased, among others, have to be specified clearly to avoid any dispute. In case of more than one nominee, it is important to mention the share of each nominee.

In case the nominee is a minor, remember to add an elderly family member’s name as a guardian. “Not appointing a guardian for a minor nominee or adding an elderly family member (father or mother), who may not be around at the time of the demise of the account holder is another mistake,” said Nishant Agarwal, managing partner and head-family office, ASK Wealth Advisors.

Update the details

Generally, people give nomination details at the time of making the investment or buying an asset, and forget about it. It is advisable to update the details periodically.

“Check nominations at least once a year, and check spelling and all the details at the time the first investment statement is received,” said Lovaii Navlakhi, managing director and CEO, International Money Matters, a Bengaluru-based financial planning firm.

It’s important to update nomination details after certain events in life. “One must update the nominee in case of any change in the relationship status or death of a nominee. If any changes are made in the nomination, the corresponding details should be updated across the documents,” said Agarwal.

A nomination allows financial institutions such as banks and insurance companies to transfer the investments or assets to the person nominated by the deceased without getting into legal processes such as obtaining a succession certificate. These processes take time and the family is not able to access the asset or investment in the interim. So take all necessary steps to update your nomination details as early as possible.

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