Nomination vs Will in Property Succession: What You Need to Know

When it comes to estate planning, understanding nomination vs will in property succession is crucial. While most people add nominees to their accounts, many misunderstand the legal role of a nominee.

Many people believe that a nominee automatically inherits the returns from such accounts after the account holder’s death. Emphasis by the Insurance Companies and the banks given to the need to name a nominee in every such investment account.

Difference between Nominee & Beneficiary

In a recent judgement, the Supreme Court of India ruled on the difference between a nominee and a beneficiary. The case involved Sharbati Devi & Anr vs Smt. Usha Devi.

The Supreme Court clarified that a nominee acts only as a caretaker of the funds. They cannot use the money for their own benefit.

The nominee must hand over the money to the account holder’s legal heirs as determined by the Court under “The Hindu Succession Act 1956”. However, the nominee can be a beneficiary also.

Nevertheless, it is prudent to subscribe a nominee, wherever required.  I strongly recommend nominating a person who you want to receive money and is a legal heir to your property.

Exception to the General Rule

The above principle/ rule has two exceptions, where a nominee is treated as a beneficiary.

• First is the “Life Insurance policy”, wherein, a new section 39 (7) has been inserted in the Insurance Regulatory & Development Authority Act 1999, stating that the nominee in a Life Insurance policy is the beneficiary of the policy.
• Second, is a “Will”, where the nominee and beneficiary are the same.

What is a Will?

A “Will” is a statement preferably on stamp paper, dividing property and Investments to persons to whom the maker wishes to receive after his death.

The will is signed by the maker and two witnesses. The testator can register the Will with the registrar, which is optional but highly recommended. The Will also contains the name of the executor, who executes the Will after the death of the maker.

Authorizing a will avoids litigation between children and relatives of the maker.

If a will exists, there is no need for a succession certificate. This speeds up the distribution of property and investments.

Will : Cure for property/Investment Feuds

Therefore, I would say “Will” is a panacea for all ailments that erupt after the owner’s demise concerning property and Investments . It is wise to make a will at an appropriate time in life.

Image Disclaimer: Some images in this article are AI-generated, while others are sourced from royalty-free platforms like Pexels, used solely for illustrative purposes. Picture credit to the original owners.