Who should you name the nominee in investments?
Mihir is a 35-year-old advertising professional who has been investing since he started working 12 years ago. He lives with his wife, a homemaker, and five-year-old daughter. As nomination has become mandatory for mutual fund investments, Mihir reviewed all his documents and realised that he had made his parents and sister the nominees in many of his investments and insurance policies that he had bought before he got married. Mihir wonders if changing a nominee will impact his investments. He knows his wife is not very good with financial matters and wants to know if he should nominate her or someone else who can better deal with investments. How can he ensure that he makes the right decision?Mihir’s concerns about the need to change nominations in line with the change in his family situation are valid. Nomination will help Mihir’s dependents get the money he has invested in the unfortunate event of his passing away. Problems will arise if the nominees refuse to give the corpus to Mihir’s legal heirs and dependents, primarily his wife and daughter. It will then involve a long legal process, which Mihir would wish to avoid. Mihir can change the nominations made till now by cancelling the original nominations and making new ones.
He does not require the consent of the earlier nominees for this, and he can change the nominations as many times as he likes. The nominees will not be involved in any decisions related to the investment that Mihir would like to make at any time. Their role is only as recipients of the money when he is no more. Mihir need not consider the ability of the nominee to manage financial affairs at the time of making the nomination. Mihir must make the nominations in such a way that the chances of dispute are low. These would primarily be in favour of his wife, child and parents. He can make multiple nominations and specify the percentage that each nominee is entitled to receive, so he will need to estimate the sum that he would like each dependent to have. If he is nominating his daughter, he has to also specify her guardian.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
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This story originally appeared on: India Times - Author:Faqs of Insurances
