Nomination meaning, Role of Nominee, Procedure, Minor Nominee, Nomination by Joint account holders
May 29, 2010 Finance
Meaning:-Nomination is the process of appointing a person to take care of your assets in the event of your death. You can appoint a nominee for your bank account, fixed deposit, demat account, or even your house. A nominee could be a family member or a friend or any other person whom you trust. However, since it involves financial matters, you need to chose a nominee with care as the person needs to be reliable enough to take care of your assets in the event of your death. So typically, when you open a savings account or fixed deposit with a bank, they will ask you to fill a form where you need to mention the nominee’s name.
Role of the nominee:-Though a nominee is an important person, he or she has no rights over the money or assets unless that is specified under the will or the nominee happens to inherit the money. So as such a nominee is a mere custodian of the assets. He is a contact point for the investments. So in the event of a person’s death, a bank could get in touch with the nominee for further instructions to act on the account. At the time of claiming the savings, the nominee will have to give a proof of his identity to the relevant authority.
Procedure to appoint Nominee:-Only individuals holding accounts either singly or jointly can make nomination. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate. The nominee appointed has to be an individual only. Only one person can be appointed as a nominee. It is not compulsory to appoint a nominee for each investment of yours. However, it is your interest that you appoint a nominee for your investment so that in the event of your death, there is little difficulty in transferring your assets. So when you make an investment in a fixed deposit, there is a column where you can mention the name of the nominee. Similarly in the case of a mutual fund investment, there is a column where you can appoint a nominee. You can appoint only one person as a nominee. In case you do not appoint a nominee while making an investment, you can also do the same at a later date, by filling the relevant application form and giving it to the bank.
Appoint of Minor as Nominee:-Yes, a minor can be a nominee. In such case, the guardian will sign on behalf of the nominee and in addition to the name and photograph of the nominee, the name, address and the photograph of the guardian must be submitted.
Nomination by Joint Account Holder:-Nomination for joint holders is permitted, however, in the event of death of any of the holders the benefits will be transmitted to the surviving holder’s name. In the case of death of all holders, the benefits will be transmitted to the nominee account.
Tags: bank account, demat account, fixed deposit, Minor Nominee, Nomination by Joint account holders, Nomination meaning, Procedure, Role of Nominee
May 29th, 2010 at 10:03 am
There has been a lot of problems in transmission of investments made in the name of HUF. Almost every Bank, AMC & others have different rules for that which are very difficult to comply.
Therefore, in case of HUF investments, in place of nominee a provision for “Alternate Karta” can be made.
May 29th, 2010 at 12:50 pm
An excerpt form the Times of India.
Nominee, not heir, to get shares after holder’s death: HC
Shibu Thomas, TNN, Times of India, Apr 21, 2010,
MUMBAI: A nominee has the right to the shares after the original shareholder’s death and not the deceased’s heirs, Bombay High Court has ruled.
Dismissing the application of a widow who sought permission to sell the shares belonging to her late husband, Justice Roshan Dalvi held that she had no right to do so since she was not the nominee. The nominee was her late husband’s nephew.
“The Companies Act sets out that the nomination has to be made during the lifetime of the holder, according to legal procedures. If that procedure is followed, the nominee would become entitled to all the rights in the shares to the exclusion of all other persons (following the death of the shareholder),” said the judge. The court said that Harsha Kokate would have no rights over the shares owned by her deceased husband Nitin Kokate. Harsha had married Nitin in December 2004. Their marital life was short-lived as Nitin passed away in 2007. A year later Harsha moved the HC seeking to sell the shares in Nitin’s demat account with Saraswat Cooperative Bank. It was found that a year before his death Nitin had nominated his nephew in respect of the shares.
Harsha’s lawyers argued that she was entitled to the shares as she was her late husband’s heir and legal representative. The lawyers also pointed out to the nomination provisions relating to insurance papers as well as shares of a flat in a cooperative housing society. Under the provisions of the Insurance Act as well as the Maharashtra Cooperative Societies Act, nomination only makes a nominee a trustee for the insurances policy or shares of the flat, argued the lawyer. The nominee holds the policy/shares in trust for the estate of the deceased, but has no right over them.
“Since Nitin died intestate (without leaving a will), his widow would be entitled to the shares to the exclusion of the nominee,” claimed Harsha’s advocate.
The HC disagreed. “The provisions (relating to insurance and housing societies) are made merely to give a valid discharge to the insurance company or the cooperative society without vesting the ownership rights in the insurance policy or the membership rights in the Society upon such nominee,” said the judge, while pointing out that the provisions of the Companies Act and Depositories Act, that govern equity shares are different. Both these laws say that the shares would be vested with the nominee on the death of the share holder.
“Upon such nomination, therefore, all the rights incidental to ownership would follow. This would include the right to transfer the shares, pledge the shares or hold the shares,” said the judge.