Whenever you open a bank account there is a section in the form which asks you to fill the nominee name. This section needs to be filled by the applicant during the process of registration. This is not only in the case of bank accounts, but also in mutual funds, insurance policies. Who exactly is the Nominee and Why Nomination is important process , let us understand the details. Nominee is the person or group that is entrusted with the assets of another holder. It means he/she is the recipient of the finances of the original holders property or assets. In legal matters, nominee is the custodian of the finances whereas in case of insurance the nominee receives the benefits of the insurance when the insured person passes away.
In simple words nominee is the name of the person who will receive the proceeds of the account or investment in case the holder or the owner demise unexpectedly.
What is Nomination in Bank?
The process of Nomination is wherein a person is appointed as the beneficiary who is entitled to receive the proceeds of the investment or assets on the demise of the investor. Nomination in bank means , nominee name given for Bank Accounts of the holder. When the Holder passes away the nominee can approach the bank and get the amount available in the account transferred to himself by showing proof of identity. The nominee can be
- Parents
- Spouse
- Another family member
- Sibling
- Children
If the nominee is minor, then the holder needs to provide details of the guardian acting as an Appointee.
Importance of Nomination in a Bank?
The main reason for appointing nominee in bank accounts is that if the person dies, their investment can be transferred to the nominee. In case there is no nominee assigned the family or the legal heir will have to go through long and tedious process to receive the investments and assets of the demised person.
In case of the depositors death the nominee can claim the funds as per rules laid down by the bank. This saves time and effort for both the nominee and the legal heirs. Nomination provides clarity about who should receive the funds in case of the depositors death.
The Major Differences Between a Lawful Heir and a Nominee
|
Basis |
Nominee |
Legal Heir |
|
Meaning |
Refers to the person nominated to act as a custodian |
Refers to the successor named in the deceased’s will |
|
Role |
Acts as a trustee holding the assets in trust |
Acts as a beneficiary entitled to the assets |
|
Indicates |
Represents the hands authorised to receive the asset |
Represents the hands entitled to own the asset |
|
Determined by |
Based on the nomination made by the individual |
Based on the will or provision of succession law |
Who can be a Nominee for a Bank Account?
- A nominee in a bank account means an individual who the holder of the account trusts and appoints as nominee.
- If the nominee is not the legal heir he or she will not be entitled to received funds.
- The nominee’s duty becomes to act as the trustee and transfer funds to the legal heirs.
- There can be different nominees appointed for different bank accounts,
What happens when there is No Nomination?
When the Account holder passes away without nomination, the legal heirs of the account holder needs to approach court to prove that he or she is legal heir and then submit the documents at the bank for claiming the funds in the account.
General Bank Nominee Rules
Here are some general rules for applying nomination to the bank accounts
- Usually only single nomination for singly held bank accounts
- As per RBI, if a person decides to keep NRI Nominee then the repatriation of the sum will be only after the permission from RBI.
- A person who is legally empowered to operate the account on behalf of the minor can also file nomination for the minor.
- Every Applicant needs to make nomination with the form of the Banking Companies Rules 1985.
- The account holder can make changes in the nomination by filling the same form as mentioned above.
Points to Keep in Mind When Nominating
- Include the nominee’s entire name, age, address, and relationship with you.
- Do not nominate “wife” and “children” as a group in your submission. Give their full names and any other information you have at the time.
- If the nominee is a minor, appoint a major as an appointee and include his or her full name, age, address, and relationship to the nominee.
- It’s a good idea to set aside some time to go over all of your financial instruments, assets, bank accounts, and lockers for “nomination.” You will be of great assistance to them when they are most in need.
Conclusion
Thus appointment of Nominee ensures that there is an interim agreement to take care of the legal and financial matters of the deceased till the time his wealth can be divided among his legal heirs. There can be different nominees to different bank accounts with the same names. One can also have separate nominees for different accounts like, Fixed Deposit (FD), savings and Recurring Deposit (RD) accounts, held with the same bank. A minor can also be the nominee of an account, but the minor must be designated by a guardian, and the funds must be given to the guardian by the bank.
