When you open a bank fixed deposit, invest in mutual funds or put money in small savings schemes like the Public Provident Fund (PPF), you are typically asked to nominate a person who can receive the funds in the event of your death.
This helps banks and financial institutions identify whom to approach for settling the investment. However, many investors assume that nominating someone automatically makes them the legal owner of the money after their death.
Who is a nominee's role?
A nominee only acts as a custodian of the assets, which may include mutual funds, PPF corpus or fixed deposit money, until they are transferred to the rightful legal heirs. Such a person has no ownership rights over these assets unless they are also a legal heir, such as the deceased investor’s spouse, children or parents.
The purpose of having a nominee is to facilitate the smooth settlement and transfer of assets after the account holder's death.
You can designate a trusted and eligible person as a nominee for your assets, who can be your spouse, sibling, family member or relative.
It is also important to review and update nominations after major life events, such as marriage, divorce, the death of a nominee, or the birth or adoption of a child, to ensure that your nominations reflect your wishes.
What determines the ownership of assets
The final ownership of money in a bank account, mutual fund, or other assets is determined by a valid will, succession laws, and the rights of legal heirs, not merely by the nominee mentioned in the account.
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