Why nomination not enough for inheritance of asset?

Last week I wrote about 'why and how of the will writing'. This week, I would like to elaborate a bit on its importance and its relevance, when compared to the nomination, etc. The general understanding about protecting the rights on the ownership of the assets, at least to the extent of financial assets, we tend to agree that nomination is a way. This is where most of us get it wrong.

The dictionary meaning of nomination is the process of appointing or proposing someone to an obligation (to an office, post, etc.,) and a nominee in finance refers to a person or entity entrusted with safekeeping securities or property of an owner during their absence. In simple terms it translates to a role of a custodian not a legal owner upon the death of the actual owner. The latter is the conventional thought when discussed about nominee. Many thus use this as an interchangeable concept about a will.

One must thus recognize that the mere presence of nominee allows the rights of the asset to be transferred is not legally tenable. Hence, nominees become mere caretakers of various accounts and have no legal power to operate that account in the absence of the original owner, despite they are being kith and kin of the demised. Though, the presence of nomination certainly makes things easier during the eventuality for a transfer of securities, assets, etc., when there's no contention or claim. Moreover, not all assets have an option to declare a nominee.

While all financial investments come with a mandatory disclosure of nomination, they don't act similarly. A nomination for a savings or a Demat account remains as a caretaker and not a legal owner. Of course, the only exception of nominee gaining the right of the benefits is in Life Insurance Sum Assured and Public Provident Fund (PPF). In these two instruments, the nominee is also the beneficiary of the proceeds out of the investments. The presence of nominee, however, reduces the lead time of a resolution in favor of the nominee, if there's no counter claimant.

Then there's another perspective of joint account holder solving the problem of overriding the will or replacement to the will. Even in joint ownership, the law assumes each one of the account holders as equal contribution unless specified. And post the death of the one of the joint holders, the access is limited to that extent of the proportion and not to the entirety of the account holdings. Again, the earlier mentioned obligations arrive for the nominee during eventuality.

Nomination prevents disputes and delays in claim settlement of death by establishing a clear title to the instrument. In case of a conflict, then the will would help decide the actual beneficiary. And in the absence of a will, the nominee and the legal heir contest in the court of law to prove their right of ownership. While nomination is important and in some instances is mandatory, it shouldn't stop individuals from creating a will. A will or a testament thus becomes prominent legal document for a legal title transfer of any asset of the deceased.

There's a conventional thought that the will has to be written at the end of one's life or it's also superstition in some that the person dies soon after a will is written. Another assumption among many is the notion of their family or children wouldn't indulge in disputes over property or money. Disregarding such irrational fears, one should realize that a 'will' allows to gain control over their assets while alive or after death. While it's known that all the details can't be encompassed into the will, as there's a possibility of further additions and deletions in their net-worth, a supplement is allowed to the original will and it's called codicil.

Though any written will is accepted by law, it must be dated and signed by the testator (the person preparing the will). It must express a desire that the testator's wishes must be carried into effect after their death. There must be a disposition of property and every will should be attested by at least two witnesses. A witness needn't read the contents of the will before signing it. A witness or their spouse can't be a legatee (person receiving the legacy) in the will. Probate is a process in which a 'will' gets certified under the seal of court competent jurisdiction with a grant of administration of the estate of the testator. A probate can be granted only to the executor appointed under the will, especially required if there're properties across multiple states. Ideally succession executor should be mentioned so that it gets executed in case of the former's death. So, in these testing times, it's advised each one of us make a will to ensure our surviving family members sustain the estate as desired.

(The author is a co-founder of "Wealocity", a wealthmanagement firm and could be reached at knk@wealocity.com)