Whether it is a bank account, mutual fund, or a post office scheme, nominee details are vital. A nominee is a person or an entity eligible to receive the proceeds from your bank account, mutual fund, or any other financial asset after your demise. Typically, people make family members, relatives, and sometimes a friend or entity their nominee. You can make different nominees for your holdings, such as a bank account deposit, mutual fund, etc. The idea behind nomination is to prevent potential discord in the family and secure them financially after you pass away.

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Why Is Nomination Important?

Nomination allows you to transfer your wealth among your loved ones smoothly. The process is quite simple. Here are some benefits of a nominee while transferring your wealth.

Fewer Formalities: By naming a nominee, you can settle the process effortlessly with fewer formalities than creating a Will, which requires more documentation. The nominee will simply need to submit the know-your-customer (KYC) details, a duly attested signature, and the death certificate of the accountholder with details of the nominee’s bank account and the fund or the MF units to be transmitted. In the case of a minor, a proof of guardianship is required.

Faster Processing: With a nominee, the settlement process is much faster as the respective financial entity will only need to verify the details and collect the necessary documents.

Amicable Settlement: Without a nominee, the process can be complicated and long drawn as the legal heirs must prove their eligibility as per the law. The process can be expensive, too. Thus, it is always better to nominate someone for your assets to ensure a smooth transfer.

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Nomination For Joint Accounts:

In an April 30, 2024 circular, the Securities and Exchange Board of India (Sebi) has made the nomination in a joint account optional. “It has been decided that the requirement of nomination specified under clause 17.16 of the master circular for mutual funds shall be optional for jointly held mutual fund folios,” the circular reads. In a revised circular on May 19, 2023, Sebi said: “Investors  subscribing to mutual  fund units  on  or after October 1, 2022, shall have choice of: a) Providing  nomination in  the  format specified in fourth schedule of Sebi (Mutual Funds) Regulations, 1996 (or), b) Opting -out of  nomination  through a  signed declaration form.”

The deadline to nominate or opt out nomination in mutual funds is June 30, 2024, failing which the folios will be frozen for debit transactions. In a joint account, a maximum of three nominees are allowed, mentioning the percentage of assets each nominee.