The provisions of nomination are found in various Acts like Life Insurance, Provident Fund, Gratuity, Co-operative societies and banking regulation acts. You might have made nominations for all your bank deposits, real estate assets in the co-operative housing society, Bank lockers, insurance policies, mutual funds, shares etc. Therefore, you assume that nominations made by you would facilitate the expeditious and hassle free settlement of death claims, or release of hassle-free lockers or safe custody to your nominee/s. Many of us do believe that they are obvious.
Status of a Nominee
Your assumptions about nomination may be correct in ordinary situation but not obvious in all the cases. The nomination does not create any title or interest in favour of the nominee. In the other words the provisions of succession law will not be disturbed by the nomination.For example, you have made nominations in the name of your wife, as you want to pass on all your money and assets to your wife after your death and not to your children during her life time. However, in legal point of view, a nominee is a trustee to the assets of a person who is dead and gone. The nomination does not alter the rights of the other legal heirs of the deceased and the nominee cannot be the sole owner of the claim proceeds released/ transferred to him/her when other legal heirs of the deceased are alive. The Supreme Court in SMT SARBATI DEVI versus SMT USHA DEVI (A.I.R. 1984 SC, 346) in an insurance case held that nomination does not confer any beneficial interest in the nominee and the other heirs can claim the amount in accordance with the law of succession governing them. So, in such cases, where other legal heirs takes the dispute to the court and bring the stay orders against disposal of your assets to the nominee, banks and financial institutions have to withhold the payment to the nominee till the clearance is received from the court. Same rule is applicable for operation in safe deposit vault/safe deposit lockers or transfer of a residential flat/commercial property in co-operative societies. When the nominee is legally bound to distribute the property share to the other legal heirs against your wish, the very purpose of nomination made by you will be defeated.
Therefore, in order to circumvent any litigation amongst your heirs in respect of distribution of your assets after your death, you need to make a ‘Will’ in addition to nomination. The WILL surpasses the succession law on inheritance and the beneficiary of the WILL (in whose name property is bequeathed) only is entitled to receive his/her share specified in the WILL without any hindrance. Thus, it is clear to you, a will made by you helps your loved one to get the properties bequeathed by you without any hindrance.
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What is the advantage of registering a will?
