The festive fervour in India has started and everyone is gearing up in their own little and big way to be with their families and celebrate with their loved ones. However, I am going to talk about a topic which, at the cost of sounding morbid around this celebratory mood, is a critical activity which a lot of us miss out which eventually creates a much unwanted hassle for our nearest ones.
What is Nomination?
Nomination is a facility that enables a deposit account holder, investor in mutual fund/other financial instruments or safe deposit locker holder to nominate an individual, who can claim the proceeds of the deposit account, investment or contents of the safe deposit locker, post the demise of the original depositor, investor or locker holder.
Who is a Nominee?
A Nominee is a person that one can list in one’s investment or bank application as the person who can receive the proceeds of your account in case of your unexpected death. The nominee can be anyone you deem to be your first relative - your parents, spouse, kids, siblings etc. Some investments also allow you to have multiple nominees where you can assign percentages of your money to each one of them. If you don’t specify percentages, it is shared equally.
Why nominate someone? Why is nomination critical?
In case of the unfortunate event of one’s demise, one’s family/ near ones go through a very painful and difficult time of coping up with the loss. Add to this, whether we like it or not, financial security and means is necessary for the surviving partner or your close ones. All banks and financial institutions have standard and simpler processes for settling death claims where there is nomination made in the account or folio. However, in absence of nomination, process of settling a death claim may require a host of documents, including death, succession certificates, a will or a court order. Although it may sound simple on paper, it ends up being a long drawn process in real life and it is not a situation which you would want to put your loved ones at a time which would anyways be an already emotionally painful situation for them.
While what I am saying sounds very logical and obvious thing that we often assume everyone must be doing, there is startling data from the RBI which shows thousands of crores of unclaimed deposits lying in banks across the country. These are deposits which are lying in accounts where the original owner has not claimed the money, or deceased or no nomination. This by itself is a proof of how difficult it can be to retrieve your money where there is no nomination done.
It will take just a visit to your bank and mutual fund company to add a nomination by filling up a simple form. This festive season, while you celebrate with your loved ones, please take out some time to regularise “nomination“ in all your financial instruments, bank accounts and lockers. You will do them a huge help when they would need it the most.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.