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As an investor, you spend most of your precious time in deciding on your investments, their tenure, and the returns that your invested money will fetch practically. Do you know who gets your investment money when you are “no more”?
I am sure most of you must have come across the ‘nominations’ column, while filling any of your financial application form, be it that for a Mutual Fund, or a Demat Account, or simply a Bank Account. More often, people have a tendency to leave the nomination field blank, or fill the same uncertainly, without even understanding the big importance of this little detail.
Here, let us try to put forth the significance of a nomination into our financial lives.
Table of Contents
1. Life Insurance
2. Mutual Funds
3. Demat Account
4. Change of Nomination
5. Minor as a Nominee
6. Multiple Nominees
7. Claim Process
- How to Register Nominee in a Demat Account
- Online Nomination in Demat Account
- How to Check Nominee in a Demat Account
- How to Change Nominee in Mutual fund Online
- How to Check Nominee in Mutual Fund
- Is Nominee mandatory for Mutual funds?
What is nomination?
A person to whom one can transfer the custodianship of his/her assets, in case of the event of the asset-holder’s death, is termed as a ‘Nominee’. Quite certainly, a nomination does not necessarily mean that you transfer your investments ownership as the full and final settlement to your nominee.
Additionally, the distribution of the same will occur in accordance with the WILL. A nominee could be a legal beneficiary, or he/she could also be any other person, who takes the permissible custody of the investor’s assets, in case of the latter’s death.
Why nomination is important?
It is necessary for any responsible person to have a nomination in place, in all of his financial investments. In the recent times, in accordance with revised regulations, it has become mandatory to put one’s nomination before commencing any investment. Amidst the compulsion, one must ensure that the investor nominates the desired person.
Nomination is a crucial aspect of financial planning that offers clarity and ease in asset distribution in the event of unforeseen circumstances like death. Whether it’s a bank account, insurance policy, or investments, nominating a trusted person ensures that your assets reach the intended recipient without delays or legal complications.
It simplifies the process for your loved ones during challenging times, allowing them to access and manage the assets seamlessly. By taking the time to nominate, individuals can provide a clear roadmap for asset distribution, offering peace of mind and ensuring financial security for their beneficiaries.
Let us now describe the process and the facts related to your nomination registration in some of the following financial assets.
1. Life Insurance
In this asset scheme, the final claim proceedings will, although settle in the nominee’s favor, but he will be liable to fund distribution only according to the ‘WILL’. If the Will is not prepared, all the heirs will get an equal distribution of the share.
2. Mutual Funds
The process of Mutual Fund nomination is as simple as filling out your form details, while making an application for investment. One can also change the nomination, by filling the specified form that is available at all Mutual Fund offices. One can also nominate a minor, along with the guardian’s name.
The nomination and the fund transfers take place according to the units mentioned in the MF folio brochure. In all future units too, the same nomination will be applicable under the MF document.
3. Demat Account
The nomination in a demat account will not be like that of Life insurance or Mutual funds. The nominee here will be the legal beneficiary of the shares. Therefore, one must take care, while selecting a nominee for this account.
According to the Companies Act, this account’s nominee has the power to supersede the Will, thereby transferring the share holdings to nominee’s Demat.
Rights of Nominee in Demat Account
In a demat account, a nominee plays a crucial role in case of the death of the account holder. The nominee is designated to receive the securities or assets held in the demat account in the event of the account holder’s demise. Here are the rights and responsibilities of a nominee in a demat account:
- Receiving Assets: Upon the death of the account holder, the nominee has the right to receive the securities, shares, and other assets held in the demat account.
- Transfer of Assets: The nominee can request the transfer of the securities and other assets from the deceased account holder’s demat account to their own demat account or any other account as per their choice.
- No Right to Operational Control: While the nominee has the right to claim and receive the assets held in the demat account, they do not have the operational rights to manage the account during the account holder’s lifetime unless specifically authorized.
A nominee in a demat account is not an owner of the assets in the account, but rather someone who has the right to claim those assets if the account holder dies.
Remember, adding a nominee is crucial for a smooth transition of your demat account holdings in case of your unfortunate passing.
4. Change of Nomination
One may change his nominee’s name, anytime during the term of investment. There is no restriction on the number of times, the nomination can be changed.
It is better for you to review the nomination periodically. Initially you could have kept your mother as the nominee. After your marriage you may change it to your wife. Later when your children become major, you may change the nominee as your son or daughter.
5. Minor as a Nominee
Even you can nominate a minor. In case the nominee is a minor, an appointee looks after the asset until the minor turns into a major. So in addition to selecting the nominee you need to select the appointee for the minor nominee.
6. Multiple Nominees
Life Insurance also has the option of having more than one (multiple) nominations, which divides the investor’s assured sum among all his nominees.
7. Claim Process
The transfer of the investor’s assets does not take place directly, without completing a stipulated claim process. The nominee must first inform the respective financial institutions, regarding the investor’s death, and thereafter seek knowledge of the assets claiming process. The nominee should also submit the mandatory documents to validate his asset transfer, as stated under the law.
Although due to the law imposed by various regulatory bodies, the transmission processes of every financial institution is different, but let us get to know about some of the primary documents that all of them require. These include the Identity Proof of nominee, KYC Compliance (in case of MF and Demat Accounts), the Probate of Will, Succession certificate, the Claim Form, and Death certificate of the unit holder.
How to Register Nominee in a Demat Account
To register nominee in your demat account, here’s a quick guide:
A. Contact Your DP: Reach out to your Depository Participant (DP) – the institution holding your demat account.
B. Request Nomination Form: Obtain a nominee registration form from your DP’s website or branch office.
C. Fill and Submit: Complete the form with your details and your nominee’s information. Submit it to your DP along with any required documents.
By following these steps, you can nominate a trusted beneficiary to inherit your demat holdings in case of your passing, offering peace of mind and simplifying the process for your loved ones.
Online Nomination in Demat Account
To add a nominee to your demat account in online, follow these steps:
Step 1: Log in to your demat account through your depository participant’s (DP) online portal.
Step 2: Navigate to the ‘Profile’ or ‘Account Details’ section.
Step 3: Look for the ‘Nominee Registration’ or ‘Add Nominee’ option and click on it.
Step 4: Enter the nominee’s details like name, relationship, date of birth, and contact information.
Step 5: Upload necessary documents as per the DP’s requirements.
Step 6: Review the information carefully and submit the nomination form.
Once submitted and approved, the nominee will be registered.
How to Check Nominee in a Demat Account
How to check if my demat account has a nominee?
Checking the nominee details in a demat account is a straightforward process that ensures your assets are in safe hands.
Step 1: To verify the nominee in your demat account, log in to your demat account online or contact your depository participant (DP) directly.
Step 2: Once logged in, navigate to the ‘Profile’ or ‘Account Details’ section where you’ll find the nominee information.
Step 3: Ensure that the nominee’s name, relationship, and contact details are correctly listed.
Step 4: Regularly reviewing and updating nominee details is advisable to reflect any changes accurately.
Step 5: By keeping this information up-to-date, you ensure smooth asset transfer and protect your legacy.
How to Change Nominee in Mutual fund Online
Follow these steps to update your nominee details online :
Step 1: Log in to your mutual fund company’s online portal or mobile app.
Step 2: Navigate to the ‘Profile’ or ‘Account Details’ section.
Step 3: Look for the ‘Nominee Details’ or ‘Update Nominee’ option and select it.
Step 4: Enter the new nominee’s details including name, relationship, date of birth, and contact information.
Step 5: Upload any required documents as specified by the mutual fund company.
Step 6: Review the updated information and submit the changes.
After submission and verification, the nominee details will be successfully updated.
How to Check Nominee in Mutual Fund
i.) Check Online: Many Asset Management Companies (AMCs) or mutual fund houses allow online nominee verification. Visit your AMC’s investor portal, log in securely, and navigate to the section for account details or nominee information. This option provides instant access if available.
ii.) Contact Your AMC: If your AMC doesn’t offer online nominee verification, reach out to their customer service department. You can usually find the contact details on their website or account statements. Provide your folio number and other relevant details to inquire about your registered nominee.
Remember: Keeping your nominee information updated is crucial. If your circumstances change, contact your AMC to update your nomination and ensure your wishes are met.
Is Nominee mandatory for Mutual funds?
Yes, Nomination for Mutual Funds is Often Mandatory
In India, for new mutual fund investments since October 2022, nominating a beneficiary is mandatory. This ensures a streamlined transfer of your holdings to your designated heir in case of your passing.
Existing investors also had a deadline to either nominate or opt-out by March 2023. Not nominating can lead to delays and complexities during inheritance. Avoid confusion and ensure your wishes are met by appointing a nominee for your mutual fund holdings.
Concluding the discussion over Nominations, we will just say that this small step is just a way to ensure the security of our loved ones in a large way, which could otherwise become challenging for your nominees. Therefore, along with this, one should also prepare a registered WILL as part of his succession planning. Doing this will further reduce the pressure of assets’ transfer.
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