Nomination does not confer any beneficial interest on the nominee
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I want to leave a part of my assets to a voluntary organization. I had planned to leave a house in its name. But would it be better to leave a financial asset, as that is more liquid? Should I name the asset in the name during my lifetime or in my Will?
I have assumed that you are Hindu and that you have full disposing power over the assets you wish to donate to the organization.
Prior to making the donation, we would recommend that you check with the organization whether it would prefer to receive the donation in the form of a financial asset or immovable property. Also, it would be advisable to confirm whether the organization’s constitution permits it to accept donations in the form of an immovable asset.
Subject to the above, in case you choose to donate an immovable property to the organization during your lifetime, it will have to be done through a deed of conveyance which would be in the nature of a gift (as it appears from your query that the transfer would be done without any consideration). If the transfer is done during your lifetime, without consideration, the transfer would be a ‘gift’ and would have to be effected in accordance with the provisions of sections 122 and 123 of the Transfer of Property Act, 1882 (TOPA). As per section 122 of TOPA, a gift must be of existing movable or immovable property made voluntarily and without consideration, by one person, called the donor (i.e. the person making the gift), to another, called the donee (i.e. the person receiving the gift), and accepted by or on behalf of the donee, (which acceptance should take place during the life time of the donor). Further, as per section 123 of the Act, if the gift is in the nature of an immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.
The deed would also have to be registered within a period of 4 months from the date of execution as per the provisions of the Registration Act, 1908. Further, since the transfer is being effected during your lifetime, it would attract stamp duty. However, depending on the state laws, where the immovable property is situated and the manner in which the conveyance is drafted, you may be entitled to claim a beneficial rate of stamp duty where the settlement of the immovable property is for religious or charitable purposes.
However, in case you bequeath your assets to the organization under your Will, it would take effect only upon your death and the asset will vest in the NGO only on your demise. Therefore, until then, you can use and retain control of the asset. Also, a Will is revocable and hence you can revoke it at any time during your life time. Further, the transmission of your interest in the immovable property through your Will will not attract stamp duty. This therefore may be the preferred approach. However, please ensure that your Will is duly executed by you in the manner set out in the Indian Succession Act, 1925. For this purpose, your Will should be executed by you in the presence of two witnesses competent to contract and your attesting witnesses must attest (i.e. sign) your Will as your attesting witnesses, in your presence and in the presence of each other, after they have seen you executing the Will. You may opt (though this is optional and not compulsory) to register your Will with the office of the Sub-Registrar of Assurances under the provisions of the Indian Registration Act, 1908.
Will the instructions in a final Will override the nomination details mentioned in financial products? What purpose does nomination serve?
Nominations are made for convenience—to enable entities like company, depository, bank or insurance company, to discharge their obligation and to enable them to deal with a specified nominated person until the legal heirs are ascertained and to protect the assets and rights of the deceased until the legal heirs can take steps to assert their claim.
Thus, on the death of a person, the nominee is entitled to receive the amounts payable (as trustee on behalf of legal heirs) but the amount so received will be held for the benefit of the ultimate legal heirs and is to be distributed according to the law of succession, i.e., testamentary or intestate succession. In other words, nomination does not confer any beneficial interest on the nominee nor does it result in transfer of ownership of an asset to the nominee.
Therefore, if there is a valid Will, the assets of the Will vest in the beneficiaries under the Will. If there is no Will, the assets will vest in the legal heirs of the deceased, as on intestacy, as determined in accordance with the personal law by which the deceased is governed.
Marylou Bilawala is partner, Wadia Ghandy & Co. Advocates, Solicitors and Notaries
Queries and views at firstname.lastname@example.org