What happens if both investor and nominee die? Why nomination matters

When you own a significant amount of financial assets, including securities, mutual funds and fixed deposits (FDs), it is vital to make sure that they do not fall into the wrong hands after your demise. 

To ensure that your assets are seamlessly transferred to your legal heir(s), it is recommended to name someone you trust as a nominee of your assets. The person you choose as nominee could be a family member, spouse, your offspring or a legal heir.

Why should you register a nominee?

It is important to register a nominee so that your financial assets can be safely transferred to the rightful owners, including your wife and children. For example, Mr ABC owns ₹50 lakh worth of mutual funds across fund houses. He has named his wife as the nominee of his assets. This means after his death, his wife can acquire the assets which were once owned by Mr ABC.      

What happens if there is no nominee?

If there is no nominee, the right of legal heirs still stands. For example, in the above case, Mr ABC's wife will still be the owner of his deceased husband's assets, but it would be cumbersome to claim the transfer of ownership. 

Having a nominee makes the ownership transfer process simpler. 

Between nominee and legal heir, who has the first claim?

There is a misunderstanding that the nominee and the legal heir are always the same, but it is not true. They can be the same person, and more often than not, they are the same. But it is not always the case. The nominee's role is to transfer the asset to the legal heir.     

What if the nominee also dies? 

If the nominee also dies, then the legal heir(s) can claim the ownership. For example, if Mr ABC's wife has also died, then his children, who are his legal heirs, can stake their claim.

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