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Nomination enables the asset holder to nominate (propose or formally enter as a candidate) an individual to claim the proceeds upon his/her death
Financial decisions shouldn’t be an act of ignorance or laziness. As much as we would like to believe that wealth planning is a result of intense research, it’s simply a copy-paste of what is popular in the society. Both hear-say and word-of-mouth play dangerous roles in messing our head and later the finances as it deprives you of the fundamental understanding of concepts.
For example, there must be many who don’t understand the difference between a nominee and legal heir and the importance of writing a will. People consider writing a will as an added expenditure because it’s assumed that if a person dies, his wealth will automatically be transferred in the name of his wife and children.
Who is a nominee?
Nomination enables the asset holder to nominate (propose or formally enter as a candidate) an individual to claim the proceeds upon his/her death.
“Anyone can be made a nominee for your investments. It doesn’t necessarily have to be a blood relation but ideally, someone who can be trusted with your money,” Shweta Jain, financial planner and founder of Investography said.
However, nominee is just a custodian/trustee/protector of the wealth he’s nominated for. H/she is liable to pass it down to the legal heir. This process becomes easier when a will is placed on record. Otherwise, the matter may be dragged to the court of law and could take umpteen time to reach a solution/compromise.
Who is a legal heir?
A legal heir is someone with utmost right to claim the wealth and property of the deceased person in accordance with the signed legal will of the latter. If there is no will, the personal succession law can be applicable. The legal heir is highlighted in the will as ‘key inheritor’ and can be more than one person as well.
Nominee vs legal heir
In one of Money9 Helpline’s latest show, Harshad Jain of Ahmedabad put forth his query that stated –
“We are a family of four- me, my wife, and two kids. God forbid, if something happens to me, then all assets will go to my wife, which is what I would want. Then why should I take the pains of writing a Will and bear an additional expenditure?”
Hemant Rustagi, the founder of Wise Invest, explained Jain the difference between a legal heir and bank nominee.
“Drafting a Will is a very simple and easy process. It is not at all costly and takes minimal expenditure. First of all, you should understand that a nominee and legal heir are different concepts. The nominee is a custodian or caretaker whereas the ultimate beneficiary is a legal heir. In a family legal heir can be a mother, father, or any other person. So to avoid any such complication you should draft a will,” Rustagi asserted.
Right time to write a will?
A will not only gives name to the leftover wealth of the deceased, it also plays a massive role in preventing family disputes, legal delays, costs and other unwanted situations that one may have to deal with.
“In the good old days when there wasn’t any Covid, 50 was the right age to execute your Will. But now, in view of these stressful times, any person with some reasonable assets, mainly immovable, should execute their Will. 25-30 age bracket suits well nowadays. And you really don’t need a lawyer, unless your Will is complicated,” Dr Sujay Kantawala, senior lawyer, said.