Nomination is of utmost importance

We invest with a plan to consume it for a future need or to leave it as an estate to the next generation. What one also needs to assume is the proper transferability of these investments in a sudden event of demise of the investor.

How would the investments reach the desired beneficiaries in this extreme event? This is especially become critical with financial investments. The solution is in the nomination, a simple process by which the holder of the securities would provide a clear path on to whom those securities belong to upon the holder's death.

All financial instruments come with the need to declare the nominee for the investments. The savings bank accounts mandate nomination, usually of one of the family members likewise the mutual fund folios and insurance policies.

In all the cases, the nominee relationship is also required to be provided. Even minor individuals could be nominated for the instruments or securities but have to provide the name of the appointee and the latter's relationship with the securities holder, often times, their relationship with the minor nominee too. There could be multiple nominations for investments.

When it comes to direct equity i.e. stocks, the nomination is treated same as that of the demat account. Nomination here makes the process of transmission of shares easier.

In case of death of the demat account holder, the shares could be transferred to the mentioned nominee(s) without the need for succession certificate or letter of administration, etc.

So, by providing nomination in the demat account, would avoid disputes and legal hassels that may arise after the death of the account holder.

The same is applicable to the other securities invested through that demat account like mutual funds, corporate FD/bonds, ETF, etc. The nomination could be done at the time of opening of the demat account or even at any time later.

Once the account is active, the account holder could modify or cancel the existing nomination at any time for any number of times. All individual demat account holders can nominate their proffered individuals while this is non-individuals like, body corporate, society, Hindu Undivided Family (HUF), Trust, etc. can't nominate.

It's always optional for the account holder to provide nomination at the time of opening a demat account and could opt to not give any nomination by declaring "I/We do not wish to make a nomination."

However, it's vastly recommended to have nomination mentioned in the demat account or update in case of missing ones. Also, one could have multiple nominations but need to specify proportions (in percentages) for the securities available in the demat account.

But, at the same time, the account holder can't make separate nominations for each of the securities held in a demat account. Even an NRI could be a nominee in a demat account.

If nomination is not done and when the security holder dies, their legal heirs will have to go through the process of producing all kinds of certificates, documents like death certificate, proof of relation, etc. for each legal entity.

Though, it's not compulsory, it is highly advisable to declare a nominee across all the financial instruments. But, with a mentioned nominee, the financial institution is bound to transfer all the holder's assets to the nominee.

While nomination is important it doesn't allow the right over the assets and is legally bound to transfer it to the legal heirs (one of whom could be a nominee).

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.

It's thus important to provide the nominee details at each of the financial investment when done and if there are multiple instruments and nominees are involved, it's suggested to have a written will to have a seamless transition of assets.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at [email protected])