This time, let me start with a real life story.
As Anand, a loving father, lay on his hospital bed, frail and aware of his nearing end, his heart was heavy—not just with the weight of his fate but with a decision he had made for his daughters, Maya and Aishwarya. Maya, the eldest, was a successful investment banker, while Aishwarya, despite her talent, had struggled to find the same success. Anand loved them equally but decided to leave a larger share of his assets to Aishwarya, hoping to balance their financial positions.
And on one unfortunate day, Anand passed. Grief hung in the air, yet the practicalities of the world couldn’t wait. In weeks that followed, Maya and Aishwarya have initiated the process to claim their father’s assets. Though Maya wasn’t upset about the money itself, the unequal distribution was unsettling for her. Over tea with a lawyer friend, she shared her unease, and to her surprise, her friend revealed that despite the nominee declarations, Maya might still be entitled to a larger share. Curious? Read to learn how
Let’s first understand what do these terms mean
Nominee: A nominee is a trustee, a representative chosen by an individual to receive their assets or funds in the case of their demise. In simple words, a nominee is a person who holds the assets of the deceased until the legal heirs are identified. Declaring nomination does not grant the nominee any legal rights on the property of the deceased
Legal heir: A “legal heir” refers to a person or group of people who is/are entitled to inherit the property of the deceased either through a valid Will or through applicable succession laws. As per Hindu succession act 1925, legal heirs are classified into two classes. Class I legal heirs take precedence over class II heirs. General class I legal heirs are spouse, children, parents and grandchildren.
Simply put, your property is not transferred to the nominee but to the entitled legal heirs either through Will or applicable succession laws.
Declaring a nominee helps financial institutions to transfer the assets without hassle. However, if you want your assets to be distributed exactly as you wish, creating a Will is the only way to ensure that happens. More about this in the next article.
As everything else in this world, this statement of “Nominee is only a trustee and not entitled to the assets” also has exceptions
Exceptions:
- Life Insurance: Under the Insurance Laws (Amendment) Act of 2015, introduced a concept called “beneficial nominee” . It means nominee takes precedence even over legal heirs in claiming death benefits of a life insurance policy
- Employee Provident Fund: For the Employee Provident Fund, the nominee is entitled to receive the funds upon the death of the person. Only legal heirs can be declared as nominee incase of EPF
I hope this article has clarified the difference between a nominee and a legal heir, and that this understanding will help you make more informed decisions.
