A nominee is a person appointed by an account holder, whom the bank pays the amount after the demise of the account holder without asking for much documentation.
Individuals should opt for nomination facility in all the financial instruments such as bank account, mutual fund account, demat account and insurance policy.
Nomination facility, if availed, would ensure smooth settlement of a claim to the nominee.
Here are few smart things to know about nomination:
1) One can even nominate a minor, provided the guardian will sign on behalf of the minor nominee and, in addition, there should be a name and photograph of the nominee along with the name, address and the photograph of the guardian.
2) Accounts with a nomination, the balance outstanding will be paid to the nominee on verification of his/her identity such as Election ID Card, PAN Card, Passport etc. and proof of death of the depositor.
3) Nominee can be changed by the account holder any time by just filling the nomination form available with the bank.
4) Only individuals holding accounts either singly or jointly can make a nomination.
5) Society, trust, body corporate, Karta of Hindu Undivided Family, holder of the power of attorney cannot nominate.
6) Nomination facility does not take away the rights of legal heirs on the estate of the deceased. The nominee would be receiving the stock from the bank as a trustee of the legal heirs.
Also read: Nominee Vs Legal Heir
7) Incase of HUF accounts, banks shall allow the new Karta to continue to operate the existing account on the basis of documents. Where the account is to be closed and balance in the account to be paid to the new Karta.
Nomination facility simplifies the procedure for settlement of claims of deceased depositors as banks get the authentication to whom dues should be paid. So better to opt for nomination and avoid all the complexity which may arise.