Nominee, as the name suggests, is the person, who is chosen by another person to function as his/her representative in a particular matter. He/She is the one who receives the assets or amount, on the demise of another person.
The nominee is not the owner, but for the time being acts as the holder of the wealth of the deceased and passes it to the legal heir, according to the will drafted by the deceased.
A person can make nominee, only from his/her family members. Any nomination done in favour of persons other than the family members is termed as void.
However, in case a person has no family, then he/she can nominate any person as a nominee, and whenever the person acquires the family, the previous nomination becomes invalid and a fresh nomination should be made, in favour of the family members.
Legal heir alludes to the successor, who is entitled to become the ultimate owner of the assets and investments of the deceased. The name of the legal heir is mentioned in the will of the deceased, and in case there is no will made by the deceased individual, then the rules of succession law will apply, and on that basis, the property is distributed among various claimants.
The right of the legal heir to the wealth is indefeasible in nature. Basically, the legal heirs of a deceased who is married are spouse, children and parents, whereas, in case of an unmarried deceased person, his/her parents and siblings would be the ultimate legal heirs.
Difference between a Nominee and a Legal Heir:
The nominee can be described as a person in whose favour nomination is made by another person, to authorize him/her get the sum after that person’s demise.
On the contrary, the legal heir is the person who gets the ownership interest in the wealth of another person, in the event of the death of that person.
The nominee acts as the trustee, who holds the property of another person till it is transferred to the legal heir. As against, the legal heir plays the role of the beneficiary who has an ownership interest in the property of the deceased.
A nominee is the one authorised to receive the amount after the demise of the person who made a nomination. On the contrary, the legal heir is the one who has the ultimate right to the assets or wealth of the deceased person.
Nomination decides the legal nominee, whereas it is the will that specifies the legal heir of a person. However, in the absence of a will, the provisions of succession law shall apply.
Writing a will is very essential if you consider the entire legal ramifications and its sheer importance, from a larger perspective.
A will is basically the written declaration made by an individual about the distribution of his/ her assets, wealth and property to beneficiaries or legal heirs, as per his/her wishes.
Beneficiaries can include members of the family, other relatives, friends, acquaintances, organizations, charities and so on.
The importance of a will in India cannot be emphasized upon enough, when it comes to safeguarding the interests of family members, ensuring proper distribution of wealth as per the wishes of the deceased; it also plays a big role in preventing any family disputes, legal delays, legal costs and other unwanted situations.
What is a nomination?
In the legal context, nomination is only a provision for the claiming of property by the nominee as ‘custodian’, in case of the death/ demise of the owner of the property. However, there are some key aspects to note in this scenario:
The nominee can only claim the property in case of death of the property owner
He/ she will only be the trustee/ custodian for a temporary duration, until the establishment of the legal heir to the property/ estate, as per the Succession Act (or Will)
Thereafter, the nominee will hand over the property/ estate to the legal heir/ heirs, as per the law.
If there is no will or stated legal heir, the property will be equally distributed as per the Hindu Succession Act, under the following tenets:
Equal distribution amongst all Class 1 heirs. In absence of Class 1 heirs, equal distribution amongst Class 2 heirs
In case of no Class 2 heirs, distribution amongst Agnates and then Cognates
In case of no one being present, the Government takes the property/ estate of the person deceased.
As a result, it can be seen that the nominee is only the trustee of the property and has to hand the same over to the legal heir of the property, based on the will made by the person deceased.
Q: What is the difference between a will and a nomination? What are the circumstances under which either should be used?
A: A nominee is somebody who receives the asset upon death of a person. However, the nominee cannot own it. Let me simplify that. Say, if a husband has nominated his mother in life insurance policy. Upon his death, the entire proceeds of life insurance will go to the mother, but the mother can’t own it if a will has something contrary written. If the will says that a portion of or the entire asset should go to his wife and children then the mother will have to part with that.
Nomination, in simple language, is the right to receive. But a will shall decide who will eventually own the asset. In case there is no will then there is Indian Succession Act, Hindu Law, Mohemmadan Law etc. Summing up, nomination is the right to receive, will is the right to own except in case of equity shares where nomination prevails.
Q: If a person were to nominate for all his assets, would he then need a will?
A: If, for example, a person has said that he is nominating all his assets to his brother, but in a will, he writes something different or if there is no will then based on the Indian Succession Act, Hindu Law or Mohemmadan Law, the brother will receive all the assets but he will have to distribute it. If there is a will and it says that the entire asset will go to his brother, then the brother will own it. But if the will says anything contrary, the brother will probably more act as a trustee holding onto assets till the final will is out. If there is no will then the nominee will hold onto the assets and it becomes his.
Q: Do you advise individuals to do a nomination as well as a will?
A: You require both. The moment you make your first asset, you should do a nomination so that upon your death somebody receives that asset and it doesn’t get into regulatory requirements.
But you have to have a will because based on the will, your assets will be distributed. If there is no will then there is Indian Succession Act, Hindu Law, Mohemmadan Law etc. that prevails.
Q: An investor’s grandfather’s will is being contested. How should he proceed?
A: The final will will prevail, however, if your uncle is contesting saying he was not in a stable frame of mind then it will be based on evidence. Whatever is the situation, was he really not in stable frame of mind? What would witness say? Ideally in these circumstances, we recommend having a doctor as a witness, because then it becomes more foolproof. Your uncle can definitely contest, but the court will look at the evidence and based on that, the decision would be given.
Q: What succession laws apply for legally adopted children?
A: We have Indian Succession Act, but ideally, if you make a will then it’s foolproof. In a will, you may want to mention the relatives and say that you have a legally adopted child and you are bequeathing your assets to him or her, then there is no need for any Succession Act.
The issue only arises if somebody passes away without making a will. Can assets be bequeathed to legally adopted child? Yes. Can it be willed? Yes. Is it accepted by law? Yes, it is. If there is no will then obviously it will get into Indian Succession Act and the decision will be based on whatever the Act says. But legally adopted children have a right in the assets of parents.
Q: In case a will is not made, does the legally adopted child have the same rights as the natural child?
A: Exactly. As long as the child is legally adopted, all the formalities are complete, there is no issue on that.
How to get a succession certificate?
A succession certificate is given by a civil court to legal heir(s) in case the deceased person hadn’t made a will. To get a succession certificate, you need to submit a petition to the civil court in whose jurisdiction the the property lies. You also need to submit the death certificate of the deceased. The court will issue a notification in newspapers for 45 days and if there are no contestants during that period, the succession certificate will be issued to relevant applicants.
By and large, the legal heir and nominee determine two different persons, i.e. the former determines the ultimate owner of the property and the latter decides the recipient of the property.