Nomination-its benefits & implications

Mr. Vijay, died of road accident leaving his young wife and two children.  He was working in a private firm for the past 12 years.The family was crestfallen due to sudden loss of the head of the family.  Sheela, wife of Mr. Vijay, a homemaker took courage to manage the situation. 

Sheela called on Mr. Vijay's employer to enquire about the status of PF and gratuity of her husband.  To her surprise,  Mr. Vijay has nominated his mother as the nominee for his PF and gratuity dues, who has already expired long back. The HR Manager expressed his inability to help her immediately, but took the details from her to  inform  about the terminal dues.

Back home empty  handed she started searching for investment and other details of her late husband.  She found a Pass book of SB account, some Fixed Deposit receipts, NSCs etc.,  She  heaved a sigh of relief, after seeing the details of Mr. Vijay's investments. 

The relief couldn't lost long after her meeting with the Bank Manager.  She was informed that  her late husband  made no nomination. She has totally broken down to know that it takes lot of to get back her money, as there is no subsisting nomination. 

This may happen to many of us.  Those formalities which could have been easily avoided, but for our forgetfulness or postponement.  This will surely put the survivors to lot of avoidable difficulty.

All banks are insisting for  nomination to  all the deposit accounts, lockers, articles kept in safe custody etc.,  Also employers accept nomination for terminal benefits like PF and Gratuity.  In fact Nominations can be made even for LIC Policies, Demat Accounts, Post office SB, RD, NSC etc.,

If the deposit holder has made nomination, then the nominee will easily get the money  outstanding in the deceased's account.  Banks only ask for  a)Proof of the death of the deposit holder and 2) Proper Identity and address proof of the nominee.  If these documents are provided to the satisfaction of the bank, the bank transfers the money to the nominee’s account. This is a very simple procedure. 

Banks accept nomination for the locker facility as well. In lockers there are two types of nominations.  One nomination is for operating the locker during the lifetime of the Locker Holder.  Another nomination is for claiming the contents of the locker on the death of locker holder.

In the absence of a proper nomination, (depending upon the amount of deposit)  banks ask for production of Succession Certificate from the competent court, which is time consuming.  Especially where there are more than one legal heir to the deceased depositor, the banks’ generally insist for production of Succession Certificate from the claimant(s).

The nomination once made may not be final.  During the life time of the depositor, the nomination can be changed any number of times.   This is even applicable in case of contents of the locker as well.  

Banks do not accept multiple nomination for a single account/locker.   However, this rule of is not applicable to terminal benefits of the employee like PF and Gratuity. The employee can nominate multiple persons as nominees mentioning the Percentage share payable to each.  For Example: PF amount wife 60%, Son1- 20%, Son2- 20%, gratuity 80% to wife and 20% to mother.

There is a general notion among the public that no nomination required for a joint accounts.  But it is advisable to have nomination for joint accounts as well.  

It is a general understanding of the public that the money which a nominee gets on the death of the depositor belongs to the nominee.  Actually, it is not so.  It is only an arrangement for easy determination of the claimant to the bank.  Bank is discharged from its liability by making payment of deceased depositor's deposit to the nominee.  However, nominee is not the owner of that money by virtue of nomination.  In case of partitions, nominee has to contribute the benefit he has received to the common stock to be partitioned as per the relevant Succession Act for which claimants are subject to.

If nomination has not been done till now, it is advisable to  take some time out from the busy schedule today itself to complete the nomination formalities.  In case of any mis-happenings, let the dependents do not suffer like Sheela.  What you Say???????????