How nominations work in insurance policies, bank accounts, shares, mutual funds, PPF

A nominee holds the owner’s assets in trust after his/her death. If the deceased person leaves a will, the proceeds are paid out as per its provisions. If not, the distribution of assets is governed by the personal law applicable to the deceased.

However, nomination is a very effective tool to access assets in case of death. If there is no nomination, the legal heirs may have to go through a long drawn and cumbersome process of proving themselves as legal heirs and executing indemnity bond.

• Life insurance policies

Here multiple nominees with their respective shares can be registered at the time of buying the policy. If a non-family member is nominated, the insured needs to prove insurable interest for the nominee.

• Bank accounts

Nomination in bank accounts can be done in favour of one person only. However, nomination in favour of more than one (up to two persons) is permissible in jointly operated locker accounts with common consent. Also, one can have separate nominees for different accounts—FD, savings and RD accounts held with the same bank.

• Shares

In case of shares held by the investor, nomination needs to be registered at the depository participant level.

• MF investments

Up to three persons can be nominated in mutual funds. Nomination is captured at a folio level by the fund house. All investments (though different schemes) under the same folio will have the same nomination.

• Public Provident Fund

Nomination can be made by filling up Form E and Form F respectively as applicable. Nomination cannot be made in case of a minor’s account. PPF allows multiple nominations along with specification of each nominee’s share.

Point to note

• Nominations can be changed by following due process.
• A minor can be a nominee, provided guardian details are specified in the nomination form.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)