WHAT IS A NOMINEE?

What is a nominee?

According to law, a nominee is a trustee not the owner of the assets. In other words, he is only a caretaker of your assets. The nominee will only hold your money/asset as a trustee and will be legally bound to transfer it to the legal heirs. For most investments, a legal heir is entitled to the deceased’s assets. For instance, Section 39 of the Insurance Act says the appointed nominee will be paid, though he may not be the legal heir. The nominee, in turn, is supposed to hold the proceeds in trust and the legal heir can claim the money.

Why is the concept of nominee?

So you might be wondering, if the nominee does not become the sole owner, why does such a concept of “nominee” exist at all? It’s pretty simple. When you die, you want to make sure that the PF, Gratuity, ESIC, Insurance company, Mutual fund or your shares should at least get out of the companies and go to someone you trust, and who can further help, in process of passing it to your legal heirs.

Otherwise, if a person dies and hasn’t nominated anyone, your legal heirs will have to go through the process of producing all kind of certificates like death certificates, proof of relation etc., not to mention that the whole process is really cumbersome! (For each legal entity! The insurance company, the mutual funds, PF, Gratuity, ESIC, for the shares, for the real estate..) . So, to simplify, if a nominee exists, these hassles don’t happen, since the company is bound to transfer all your money or assets to the nominee. The company the goes out of scene & then, it’s between nominee and legal heirs.

Example of Nomination X was 50 years old who died recently in an accident. As his children were settled, he wanted to make sure that his wife is the sole owner of all the monetary assets. This includes his insurance policy, PF, Gratuity, ESIC, and mutual funds. So during his lifetime, he nominated his wife as a nominee in his term insurance policy, PF, Gratuity, ESIC and mutual funds investments. However, after X’s death things didn’t turn up the way he wanted. The reason being X did not leave a will. Though his wife was the nominee in all his movable assets, as per the law, his wife, along with children, were the legal heirs and all of them had equal right to X’s assets.

1) Legal Heir Certificate is only issued from revenue office of the district to identify a particular deceased persons living heirs.

2) A succession certificate, under the Indian Succession Act, is a document that gives authority to the person who obtains it, to represent the deceased for the purpose of collecting debts and securities due to him or payable in his name. he petition should mention the relation of the petitioner with the deceased, details of other surviving legal heirs and beneficiaries, the time, date and place of death and also if he died intestate. You will also have to attach the death certificate and other documents that the court may require.

The court, after examining the petition, issues a notice to all those concerned. It also issues a notice in a newspaper and specifies a time frame (usually one-and-a-half months) within which anyone who has objections may raise them. If no one contests the notice and the court is satisfied, it passes an order to issue a succession certificate to the petitioner