Nominee or Legal heirs – who will own it ultimately after you are gone?

Have you ever wondered who actually takes ownership of your assets when you take a leap to heaven? Will it automatically pass on to your spouse/family by default in absence of a nomination or is it the biggest fault to think that everything is by default when it comes to nomination?

Even if you have nominated family members in all your investments like mutual funds/property/fixed deposits, etc. does your nominee ultimately own any of these assets in case of your death? 

The answer is – Not always.

Why - Because according to the law, a Nominee is a custodian/trustee and not the owner of the assets, and ultimately is legally bound to transfer it to the legal heirs. This gives rise to another question. Who is a legal heir?

Who is a legal heir? 
Legal heir will be the one mentioned in the Will. However, if the person hasn’t left a Will, then the legal heirs of the asset are decided according to succession laws like Hindu Law or Muslim Law.
What is the use of appointing a Nominee if he/she doesn’t become the owner?

If you don’t nominate, then your legal heirs will need to run from pillar to post to prove that they are the actual heirs. Till that time, all your assets and investments, like mutual funds or insurance will be stuck with the respective companies. However, the main reason to appoint a Nominee is to have someone you trust, who, in the event of your death, will become a guardian of your assets and distribute it to the legal heirs. In a lot of cases, Nominees and legal heirs are the same.

What is the difference between a Will and a Nomination?
Nomination is simply the right to receive whereas a Will decides who eventually will own the asset. For example, if a husband has nominated his wife in his life insurance policy, then upon his death, all the proceeds of his life insurance policy will go to her. However, if the husband’s Will says that a portion of or the entire asset should go to his parents and children, then in that case, the wife will have to part with the asset accordingly.

Exception:
Stock investment is an exception to the aforementioned rule. Here, in the absence of a Will, the nominee becomes the ultimate owner of the shares. In this case, the law of inheritance does not apply. However, if you have a Will then that will supersede the nomination. 

What if you haven’t made a Nomination on your existing investments?

It is possible to appoint a nominee by filling the relevant application forms and submitting them to the respective companies. A minor can also be chosen as a nominee if a guardian signs on behalf of a minor.