Importance of Nomination in Financial Assets

hen it comes to financial assets, such as bank accounts,  and investments, ensuring that your loved ones have access to these assets in the event of your demise is of utmost importance. Nomination is a legal process that allows you to designate a nominee who will benefit from your financial assets after your death. The significance of this process was not lost on my grandfather, a veteran medical paratrooper who had served in Burma during WWII and in the UNPKF in Congo. I vividly recall those days when I was still in school, staying with my grandparents, and how he regularly sat with his financial statements, meticulously reviewing various holdings and account updates. One update that he never overlooked was the nomination, and upon my curiosity, he once explained to me it's vital importance.

Nomination is more than just a financial process; it’s a simple way to ensure a smooth and hassle-free transfer of assets to your desired individual or entity. This legal provision allows you to specify an individual or entity who will receive the proceeds of your financial assets upon your demise. My grandfather knew this provision was a lifeline for safeguarding his family’s and loved one’s financial future and making the transfer process easy. It's a lesson I've carried with me. 

Often, investors overlook the significance of the nomination process in their financial planning. Still, it can make a world of difference in ensuring a seamless transition of assets to their family members. Let's consider a real-life scenario to illustrate this.

Imagine Mr. Sharma, a diligent investor who has spent years building a reasonable  investment portfolio to secure his family's future. He has holdings in various financial instruments, from mutual funds to fixed deposits. However, he hasn't nominated anyone for these investments or informed his family about it. Tragically, Mr. Sharma passed away unexpectedly. While grieving their loss, his family is faced with a daunting challenge. They are unaware of the financial assets he had diligently accumulated over the years. Without a nominee, gaining access to these investments becomes arduous and time-consuming. It involves legal complexities, paperwork, and prolonged procedures, adding to their distress during a difficult time.

This unfortunate situation could have been avoided had Mr. Sharma simply nominated any of his family member for his investments. It would have provided them with direct access to the assets, offering financial security and peace of mind during a trying period and avoiding potential disputes and legal complexities.

Let’s get a quick overview of the benefits of nomination -

• Effortless Access: The nominated beneficiary enjoys quick and hassle-free access to the designated financial assets, eliminating unnecessary delays, which can be especially vital during challenging times.
• Financial Security: Nomination offers financial security and stability to the beneficiary, assuring them they are the rightful recipient of the assets. This knowledge brings peace of mind and eliminates uncertainties related to asset distribution.
• Asset Protection and Creditor Rights: Nomination ensures a clear, straightforward transfer of assets to the nominated beneficiary, reducing the likelihood of family conflicts or protracted legal processes. Without a valid nomination, the assets may become vulnerable to claims from creditors or legal disputes.

What steps should we know when adding a nominee?

• Identify Your Assets: Start by identifying the financial assets that require nomination. These can include bank accounts, investments, or shares of cooperative housing societies etc. 
• Obtain Nomination Forms: Gather the necessary nomination forms or documents from the financial institutions where your assets are held.
• Accurate Form Filling: Fill out the nomination forms accurately. Provide the details of your nominated beneficiary/beneficiaries and specify their respective shares or percentages.
• Submission: Submit the completed forms to the relevant financial institutions. Ensure that you receive acknowledgment of the nomination.
• Review Your Will: If you plan to write a will, ensure that the provisions in your will align with the nominations you've made. This helps prevent disputes, as provisions in the Will can precede nominations.
• Utilize Multiple Nominations: If there is an option for more than one joint holder or multiple nominations in a product, consider utilizing this feature. It provides an added layer of protection for your investments, even if one nominee passes away.

Wrapping up, having a nomination provides flexibility and control over your financial assets. It's not just about paperwork; it's about providing clarity, benefiting your loved ones, and ensuring your assets are safeguarded and distributed according to your wishes. Your financial legacy deserves thoughtful consideration, and with the right nomination strategy, you can empower your family and secure their future. 

This article is brought to you by Nippon India Mutual Fund and is written by Ashwini Kapila at GetSetUp. Onto his second career, after being a banker who served in the financial services sector for over 28 years.