Why Nomination for Investments is important?

There are numerous reasons to invest, right? Some invest to preserve capital. Others invest for capital growth. Others invest so their children can live better than they did. One aspect is crucial and common to all investments. “Nomination for Investments”. “Nominating Someone”.

Think about it. Life might surprise us despite our plans. What happens to your carefully planned investments if something unexpected happens? Logically, your spouse or children will inherit them. However, without a firm nomination, it may be difficult.

Wonder why and want more details? Let’s begin & understand why Nomination for Investments is necessary. 

Who is Nominee?

The nominee is the individual who will receives the investment proceeds if the investor dies. The nominee will get investments, assets, and other funds.

This employment requires a close family member like your spouse, children, or parents. In rare situations, people without close relatives may nominate someone else as a beneficiary.

Meaning of Nomination

Nomination is the process of choosing who will get your investments and the money from them. If the investor dies, these investments and cash will be given to the nominee.

Depending on the type of investment you are making, you can choose any of the following people to be your candidate:

• Parents.
• Spouse.
• Siblings.
• Friend.
• Any other Family member.
• Anyone else, including a minor.

If the person you want to nominate is a minor, you will also have to give the name, address, and contact information of the guardian of the minor.

Importance of Nomination

Following are the importance of Nomination:

• There is one main reason why nomination is important. If a person dies, it makes it easier for their investments to be transferred to their choice. 
• If there is no nomination, it will take longer for the person’s formal heirs to get their hands on their assets and investments.
• Without a nomination, legal heirs will also have to show other documents, like a legal will, a legal heir certificate, and other papers. 
• All of this could slow down the process of getting the assets and investments, which could put a lot of financial pressure on the people left behind.
• If the investments already have a nominee, on the other hand, the beneficiary will only need to show proof of identity, address, and bank account information to get the investments moved.

What are the investments for which you can assign a Nominee?

Most businesses have nominations as a part of them. Here is a list of some of the most popular types of investments for which you can require a nominee:

• Nomination in Saving/Current/FD/RD Account in Bank:

When opening a savings, current, or fixed deposit account, banks now require a nominee. Fill out the nomination column on the account opening form. 

You can choose two people. If you haven’t named a nominee yet, ask your bank for Form No. DA-1. Fill out Form No. DA-2 to modify the nominee’s name.

• Public Provident Fund:

If you have Rs. 10lakh in your Public Provident Fund account and have not nominated anyone, your legal heirs will only receive Rs. 1 lakh.

PPF accounts must have a nominee. PPF accounts allow several nominees. Form F changes or cancels PPF nominations. You cannot nominate anyone if you open a minor’s account.

• Life Insurance Premium:

According to the LIC website, nomination allows the policyholder of a life assurance policy on his own life to choose a person/s to receive policy moneys in the case of the assured death. The nominee only receives policy proceeds upon the life assured’s death. 

Life assureds can amend or cancel nominations without the nominee’s consent. Please remember to name a nominee for your policy for simple claim settlement. If you don’t, it could be a disaster for your dependents.

• Mutual Fund:

You can register up to three people when buying mutual funds. The application form allows nomination details. Minors can nominate if their guardian is listed. 

The mutual fund firm website has a mechanism for changing nomination later. Mutual fund nominees receive all folio units. The nomination applies to new units purchased in the same folio. Exchange control regulations allow non-resident Indians to be nominees.

Can you switch Nominees?

Of course. You can alter your investment nominee anytime. Online changes are possible for mutual funds and bank FDs. Some investments need you to visit a branch office and submit documentation to change your nominee’s details.

Takeaway

So, do you see why Nomination is not only important but also easy to do for any type of investment you choose? When you buy an asset or make an investment, take a minute or two to fill out the nomination information. And it will be much easier for nominees to make a claim or move the assets and investments into their own names.