While you transact with banks and invest your hard earned money, you must have learned that it is extremely important to have nominees to your assets. As against earlier times, today a lot more people are nominating individuals for investments done and feel relieved when the nomination is done. This is because there is a misconception that a nominee is always the final beneficiary (the person who is eligible to inherit the deceased's assets). Let us apprise you that this perception of people is not always true.
A nominee is the trustee of your assets, to whom the mutual fund company, insurance company and so on will transfer your funds in case of your unfortunate demise. But this does not mean that the nominee will always be the owner of your assets. The owner of your assets will be your legal heir as per your Will, or if you have died intestate (i.e. in the absence of a Will) the transmission would be as per the country's succession laws.
Let us understand who will be the beneficiary in case of the following assets:
In order to transmit your assets to your loved ones smoothly, you may nominate your intended beneficiaries as nominees to avoid confusion and also make a Will and state the name of your beneficiaries for every asset in a clear manner in your Will. Remember that, making a Will which includes the details of all your assets explicitly is extremely important if you want a hassle free transmission of your wealth to your loved ones after your death. In the absence of this, someone else might lay claims on your assets and / or your family might have to go through lengthy and complex legal procedures to obtain what's rightfully theirs and thus may result in a lot of squabbling and bickering at the time of distribution of assets.
PersonalFN is of the view that simply nominating a person while creating an asset does not necessarily make him/her the beneficial owner of the asset after you are gone. Every asset is governed by different laws which might change over time. Thus estate planning needs to be undertaken to ensure the easy transmission of your wealth. Moreover, it is imperative to take all the above mentioned factors into account while undertaking your estate planning activity. Remember that this activity is an inherent part of the financial planning process and should be carried out the moment you create an asset, irrespective of your age and the size of the asset and should reviewed over time.
PersonalFN believes that it is always better to take the help of a trusted lawyer who has expertise in undertaking the estate planning activity to ensure that your assets are transmitted only to your intended beneficiaries and in an orderly manner after your death.
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
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