'Nomination' versus 'Will'

All of us work very hard to create wealth by investing our time and energy into it.? What if we are unable to transfer this wealth to our family before we leave this world!? This could certainly happen if we do not take appropriate steps in time, to transfer our wealth to the next generation.?

When a person dies intestate i.e. without making a will, the inheritance of ?assets becomes weak and it could lead to disputes amongst the family for partition ?of testator’s assets. These disputes are quite cumbersome and expensive given the Indian legal system. Partition of property takes place in accordance with the respective personal laws viz. Hindus, Muslims etc. Hence it is very important for all of us to understand the law and the process to be followed to ensure that our wealth and our assets pass on securely to our family members without any legal complications.

Nomination:

To begin with one should nominate their family members immediately to each of their assets /funds by filling in the applicable nomination form and submitting it to the relevant authority under their signature.? For e.g. bank accounts, provident fund account, equity shares, mutual funds, society membership, legal dues with employer etc.? This will ensure that, upon the death of the individual, the assets will efficiently pass on to the person nominated without running to courts for the same.

Will:

A will can be prepared by any individual at any time prior to his/her death in a simple piece of paper duly witnessed by two adults.? It is also advisable to register the will with the concerned office of the sub-registrar of assurances so that it becomes a public document and is acceptable evidence before a court of law. Besides nomination one should also prepare a will listing out each of the assets owned by us and the manner of bequeathing the same to the family. In the said will one must appoint an executor i.e. a person who shall ensure implementation of the will in the manner described therein.

As far as will is concerned it takes effect upon the death of the testator.? The will needs to be probated for it to take effect. A grant of probate is the court’s confirmation of the validity of the deceased’s last will, and the court’s authorization to the executor to begin distributing the estate of the deceased.

Difference between Nomination & Will:

A nominee of an asset is a trustee rather than an owner of the asset.? He is the caretaker of the asset and it his duty to ensure that the assets of the testator are taken care until it is transferred to the rightful owner.? a will supersedes the nomination.? It will be the duty of the nominee to transfer the asset(s) of the testator to the person named in the will who is the rightful owner of the asset eventually.? In practice, it is often recommended to have both a will and nominations to ensure that all assets are properly addressed and distributed according to the testator’s wishes.

Supremacy of Will over Nomination – Supreme Court ruling in Shakti Yezdani & Another vs. Jayanand Jayant Salgaonkar & Ors.2023 SCC Online SC 1679

The Hon’ble ?Supreme Court held that the vesting of securities in favour of the nominee contemplated under?S. 109A ?of the Companies Act 1956 & Bye-Law 9.11.1 of?Depositories Act, 1996 ?is for a limited purpose i.e., to ensure that there exists no confusion pertaining to legal formalities that are to be undertaken upon the death of the holder and by extension, to protect the subject matter of nomination from any protracted litigation until the legal representatives of the deceased holder are able to take appropriate steps. The Supreme court ultimately held that the nomination process does not override the succession laws. Simply said, there is no third mode of succession under the scheme of the?Companies Act, 1956 .? Thus, Will supersedes nomination.

Conclusion:

There have been numerous cases where family members have suffered immensely due to the lack of nomination / will by the deceased, leading to unnecessary litigation expenses and loss of valuable time in courts. Hence it is of paramount importance for all of us to realise the fact that we need to protect our assets and enable transition of it to our next generation through proper legal process whilst we are alive.

For any queries on the above topic readers may kindly write to the author of this article on [email protected]

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