Nominee Rights: People often assume that if a person is named as a nominee in a bank account, insurance policy, or investment, then upon that person’s death, the entire amount goes directly to the nominee. Many people assume that the nominee becomes the rightful owner of the money. However, this is not the case.
The nominee’s name simply indicates who will be given the responsibility of the money first, ensuring it reaches the rightful heirs. This means that the nominee’s role is solely that of a trustee, not the owner. Let’s explain the rules and regulations regarding this.
Does the nominee get the full amount?
A nominee is legally considered a trustee, meaning they are solely responsible for distributing the money or property to the rightful heirs. For example, if a nominee is named in a bank account, insurance policy, or fixed deposit, upon the individual’s death, the institution first transfers the funds to the nominee. However, this does not mean that the money becomes their sole property. If someone else has a right under the will or inheritance law, that person can file a claim in court, and the money will be awarded to them.
Different rules in different places
The rules regarding nominees vary from financial institution to financial institution. In bank accounts and fixed deposits, a nominee only holds the right to receive the proceeds, but not ownership rights. In insurance policies, the same person is also listed as the beneficiary.
Then he or she can receive the entire amount. In mutual fund or stock investments, the nominee is given the money temporarily. However, the heirs can later claim it with legal documents. Therefore, it is important to understand the nominee’s rights in each investment.
Why is it important to choose the right nominee?
Often, people don’t think twice before entering a nominee’s name or, in a hurry, enter a relative’s name. However, this small mistake can lead to family disputes later on. The nominee should be someone who is confident will ensure the proper distribution of funds to the rightful beneficiaries. This will prevent delays in the distribution of funds and legal complications for the family.
