Nominations in bank accounts and other investments: Here's all you need to know

Whenever you open a new bank account or start an investment you are asked to mention nominee details in the application form. While not mandatory, it is advisable to provide these details to avoid hassles in case something happens to you and your family needs to access the money. Take, for instance, the case of Ajit Singh (name changed).

Singh lost his parents during the second wave of Covid-19. It was a sudden demise and no will was in place. Unfortunately, even bank accounts were without nominations. He ran from pillar to post to prove his claim on bank deposits. The paperwork was a “nightmare” while he was dealing with an emotional tragedy.

“He had to justify to the bank with additional documents that he was the single bonafide claimant of the deposit balances. Not only did he submit the declarations but also no objections from all the other possible legal heirs that they don’t have any claims on such deposits,” says Mohnish Wadhwa, Partner, Wadhwa & Shah, Chartered accountants.

Necessary step

Nothing can repair the emotional loss you feel after your loved ones are gone. The financial loss and mammoth paperwork that follows make matters worse. “In India it is not easy for a legal heir of a deceased to get the assets transferred in his/ her own name. Nomination just makes it easier for such transactions to execute,” says Wadhwa.

While a will supersedes all nominations, the process takes a lot of time. If nominations are in place, at least immediate financial requirements can be met easily. “A will document does override a nomination, but it has to be probated in court which is a costly affair,” points out Wadhwa.

In case of MFs

The Association of Mutual Funds in India (AMFI) has put in place a uniform procedure to transfer the investments of deceased investors to their heirs in the absence of nominess. The process differs for investments less than Rs 2 lakh and more.

“In the absence of nomination, the process of transferring units to the legal heirs becomes more cumbersome. In case of mutual fund folios worth up to Rs 2 lakh without any nomination, the claimant of the deceased investor’s portfolio(s) has to additionally present a document establishing his relationship with the deceased investor, submit a Bond of Indemnity signed by the legal heirs of the deceased investor, individual affidavits given by each legal heir as per Annexure III and No-objection certificate from the legal heirs as per Annexure IV.  However, the claimant is not required to submit the Bond of Indemnity if he submits a Probate of Will or Succession Certificate or Letter of Administration clearly stating him as the beneficiary,” explains Sahil Arora – Senior Director, Paisabazaar.com.

The process involves even more documentation in case of mutual funds folios without nomination worth more than Rs 2 lakh.

“Claimant of the portfolio would have to get his signature attested by a Notary Public or a Judicial First Class Magistrate, individual affidavits as per Annexure III signed by the legal heirs of the deceased investor and any one of the following documents — notarised copy of Probated Will; Succession Certificate by a ‘Competent Court’; or Letter of Administration or Court decree in case of intestate succession,” says Arora.

These documents are in addition to the ones required for the folios worth more than Rs 2 lakh with nominee names, which include death certificate of the deceased investor, Form T3, usual KYC documents and attested signature by the Bank Manager as per Annexure-Ia. For mutual fund folios worth more than Rs 2 lakh, the claimant has to additionally get his signature attested by a Notary Public or a Judicial First Class Magistrate.