Importance of Nominee in account
Saturday,09 April 2022 11:22 AM IST
You work hard to save money in your Savings account, fixed deposit or recurring deposit to meet the current and future needs of your loved ones. But have you ever thought about what would happen if you are not around and your loved ones are unable to access the funds?
While it is not a pleasant situation to think about, to ensure your family’s safety, security and stability, it is very important to have a nomination in your bank account, be it a savings account, fixed deposit or recurring deposit. If there is no nominee, there is a chance that your rightful heir(s) may be asked to produce a court order or a succession certificate to claim the money. The nomination facility ensures that your funds are easily transferred to your loved ones in your absence.
What is nomination? “A nomination in banking terms refers to an account holder’s right to appoint one or more persons who are entitled to receive the money in case of the death of the account holder”. If there is a nominee the bank will transfer the funds to the nominee’s account without insisting on a court order, succession certificate or letter of administration. Sounds easy, but in reality it is not. You need to follow certain rules to ensure there is no hassle for your nominee:
In most cases, a nominee is a legal heir of the account holder. However, it might not be the same in all cases. A nominee is a ‘trustee’ of the funds of the account holder. He/she is a custodian of the funds until the legal heir can legally claim them. Cancellation or variation in the nomination can be made at any time as long as the account is in force. However, while making nomination, cancellation or variation, the applicable rules need to be followed.
If all the applicable rules are followed, nomination is easy.