Financial Planning & Nominee Rules: How to get your hard-earned money to the family after the misfortune? Complete this important task of nomination today itself.

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Life is full of uncertainties. Every earning person sweats day and night and invests in bank fixed deposits (FD), mutual funds, share market (demat account), PPF and life insurance so that his family, wife and children do not have to face financial crisis in case of any emergency or untimely misfortune. But most of the people postpone one very small but most important task while investing or opening an account –Nomination To register. According to financial experts, the biggest reason for thousands of crores of rupees (Unclaimed Assets) lying unclaimed in the country's banks, life insurance companies and mutual fund houses is the correct nominee not being registered or the old details not being updated. If any untoward incident happens to the account holder and there is no nominee's name in the account, then to get the money the family members have to go to the courts, get succession certificates made and fight legal battles for months.

If an account holder dies suddenly and there is no valid nominee registered in his financial accounts, the relief available to the family turns into a dilemma:

  • Essentiality of Succession Certificate: Banks or financial institutions do not release deposits without a valid succession certificate or probate of Will. It takes 6 months to 2 years and huge legal fees to get it done through the court.

  • NOC of all legal heirs: No objection certificates and affidavits of all the legal heirs of the deceased (mother, wife, children, siblings etc.) have to be collected. If there are mutual differences in the family, the dispute drags on for years.

  • Stuck in emergency fund: The money that is needed for immediate maintenance of the family, children's school fees or to repay loans remains 'frozen' for months.

  • Transfer to Government Fund (IEPF): If the account remains unclaimed for many years, banks or companies send those funds to 'Investor Education and Protection Fund' (IEPF) or 'Depositor Education and Awareness Fund' (DEAF), from where getting the claim becomes more complicated.

Many people harbor the misconception that the entire money will become the personal property of the person whom they make a nominee. As per Indian laws there is a clear difference between the two:

  • The nominee is only the trustee: Legally, a nominee is simply a person to whom the financial institution hands over the secured money after legal formalities. He is not the legal owner of that money, but the custodian.

  • Right of legal heir: It is the responsibility of the nominee to distribute the money as per the rules among all the beneficiaries who are the actual heirs under the 'Will' made by the deceased or under the succession law (Hindu Succession Act etc.).

  • Best way to avoid conflict: Always make your wife, children or whomever you want to be the actual owner of your property as the primary nominee in every investment.

Instantly update nominee details across all your portfolios to provide financial security to the family in your absence:

  1. Bank Savings Accounts and Fixed Deposits (FD/RD): Login to net banking or mobile app and go to 'Nominee Details' section. Enter the name, date of birth and relationship of the nominee through Form DA-1.

  2. Mutual Fund and Demat Account: As per SEBI rules, nomination is mandatory in demat and mutual fund folios. You can add up to 3 nominees from CAMS, KFintech portal or your broker app (Zerodha, Groww, AngelOne etc.) and decide the percentage share (e.g. wife 50%, both children 25-25%).

  3. Employees Provident Fund (EPF/EPS): Go to EPFO's Unified Member Portal and file 'e-Nomination' immediately. In this, details of wife and children along with photographs are recorded through Aadhaar based e-signature, due to which pension (EPS) and EDLI insurance claim is automatically secured.

  4. Life Insurance and Term Plans (Insurance Policies): There is a provision for 'Beneficial Nominee' in the insurance policy. If you nominate your wife, children or parents, they are the ultimate beneficiaries and no other creditor can claim it.

  5. PPF and Sukanya Samriddhi Account: Go to the post office or bank branch and register the name of the nominee by filling Form E.

Along with making nomination, the most important step is that your family should know where you have invested. For this, prepare a secure diary or password-protected digital document (Financial Diary) and share it with the family. It should include the following details:

  • All bank account numbers and branch names.

  • Demat Account ID, Folio Number and Broker Name.

  • Life insurance, term plan and health policy numbers and helpline contacts.

  • Locker number and location of its keys.

  • Original copies of PAN Card, Aadhar Card and Will (if made).

This small task of 15 minutes will save your family from wandering from door to door and mental torture in your absence and will ensure the right security cycle for every penny of your hard work.

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