Legal heir vs. Nominee: Who gets your money?

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If an investor passes away, nominee and non-legal heir receive the ownership rights of the share certificates, according to the court decision. But what happens to other assets? Who gets what?

Who gets What?

  • Shares and Debentures:
    • Generally, the nominee is considered as a trustee or custodian according to the law and must give the assets to the legal heirs, who are named in a will or according to succession laws of the country.
    • This applies to all financial instruments, except shares and debentures.
    • In the case of shares and bonds, the nominee is supposed to legally inherit the assets after the death of the shareholder.
    • In the 2010 Harsha Nitin Kokate matter, for example, the Bombay High Court had ruled that the nominee, rather than the legal heir, would inherit the shares.
    • In case of a joint ownership, the surviving shareholder will own the shares/bonds and not the candidate.
    • Also, if a candidate has not been named or if the nominee has pre-deceased the primary holder/s, then a beneficiary is entitled to the shares under the will of the last surviving joint holder.
    • In the absence of a will, anyone who has been nominated will be the final owner of the “shares” and the succession law of the inheritance will not be applicable. This is an old rule and has been a long time. But a will can replace it.

Also Read About : How Inherited Property Is Transferred

  • Insurance:
    • The latest Insurance Laws (Amendment) Act, 2015, makes Nominees – limited to immediate family members such as spouses, parents and children – the beneficiary so that the insurance premium can go to the intended recipient.
    • In most cases, the beneficiary must be the legal heir and not the nominee.
    • In certain cases, however, if the legal heir has not taken the trouble to claim the assets for several years and then come back to claim the assets, the court may at its discretion not allow he or she to do so.

What should you do?

One way to circumvent the ambiguity is to nominate the intended beneficiaries as nominees. This is mainly because the liability or responsibility of a financial company is paid after the money or the assets are transferred to the nominee. That is, it is up to the legal heir/s to get the nominee to pass the money to them.

Sometimes it is better to make the same person as the second owner and nominee. In such cases, the right of the person as co-owner to the extent of his share shall take precedence over his role as a nominee.

SEE: How to Write a WILL

If the nominee is not willing to pass on the assets in good faith, the matter may be taken into a court. The legal heir would have to substantiate his/her claim by producing a successor certificate or a proven/registered will.

The genuine way to avoid complications is to create a clear and unambiguous will. A will replaces everything else. It should include three broad areas of financial assets (fixed deposits, shares, debentures, investment funds, etc.), movable and immovable properties (house, car etc.) and residual goods (art, antiques, jewellery etc.).



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