Why nomination for investments is important, especially if it’s held in single name

Clipped from: https://economictimes.indiatimes.com/wealth/legal/will/why-nomination-for-investments-is-important-especially-if-its-held-in-single-name/articleshow/92449896.cms

Synopsis

Nomination can be indicated at the time of investment. Alternatively, the investor can fill up and submit the nomination form later.

Why is nomination for investments important Nomination ensures that the investments are transmitted to the nominee without much hassle. It is important to register nomination at the time of making an investment, especially if it is held in a single name. It becomes very cumbersome for legal heirs to access the investment otherwise.

Form
Nomination can be indicated at the time of investment. Alternatively, the investor can fill up and submit the nomination form later. Most investments allow for multiple nominations, wherein the investor can indicate the percentage of the investment for each nominee.

Nomination
Only individual investors can make a nomination for their investment. A karta of an HUF or a power of attorney holder cannot nominate. An individual—family member, relative, friend—can be appointed as a nominee. In case of insurance policies, if the nominee is not a relative, the policyholder needs to prove insurable interest of the nominee.

Minor as nominee
A minor can be nominated after providing his/her date of birth, and name and address of his/her legal guardian.

Changing nominee
Investors need to review their nominations periodically and register the change of nomination via:

  • Indemnity letter supported by guarantee of an independent surety.
  • Affidavit made on stamp paper
  • NOC from all legal heirs

Points to note

  • Sebi has made it compulsory for mutual fund unitholders to either register nominations or opt out of nomination with effect from 1 August 2022.
  • Nominees hold the investment proceeds in trust if the investment is disputed by legal heirs, pending fi nal decision by the courts.
  • Non-resident Indians can be made nominees subject to exchange control rules.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta
.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s