A common misconception is that once you have a nomination in place for your assets, you need not worry about succession planning. Most people assume the asset will pass on to the nominee and he will enjoy undisputed rights over it. But that is not the case. The rights of a nominee over an asset can be disputed by the legal heirs of an asset or the beneficiaries mentioned in your will. The nominee can even be taken to court over the issue.
WHO IS A NOMINEE?
A nominee is only a trustee of the funds or assets. This means that he is expected to hold and safeguard them till such time as the legal heir or the final beneficiary can be determined and the proceeds can then be passed on to him. In other words, a nominee is nothing but a caretaker of the funds.
The nominee system was put in place by banks and financial institutes, which wanted to rid themselves from disputes arising after the release of funds of a deceased person. Under this system, when releasing the funds or assets of the deceased person, the bank or financial institute takes an undertaking from the nominee saying that should there be a better claim to the funds, the nominee will respect it.
WHY DO YOU NEED A NOMINEE?
It is good to have your nominations in place because banks and fund houses can release funds to a nominee faster since the process is simple. If you have a good understanding among your family members, then with a nomination in place, you can get the assets in his custody smoothly and then divide it by agreeing on mutual terms.
WHAT SHOULD YOU DO?
Even though the nominee is not the ultimate beneficiary of your assets, experts are unanimous in advising that you must have your nominations in place. You could nominate a person you wish to be the beneficiary to the asset.
However, it is important to take the process forward. To simplify things further, it is advisable to have a will that reflects your nominations. So when you list all your assets in will, you can mention the names of the nominee and beneficiary of each asset separately. If the nominee and the beneficiary are the same person, then mention that too.