Vandana, a Bangalore resident lost Rs 25,000 as the Court backed SBI bank in a case of technical flaw in the ATM machine. She had just given birth to her child and so she sent her husband Rajesh out to withdraw Rs 25,000 from a local SBI ATM. Due to a problem with the ATM, the amount got debited from her account but her husband never got any cash out of the machine. They filed a case, produced all needed documents and CCTV footage proofs but still, the court ruled in favour of the bank and dismissed the case. It argued that Vandana should not have shared her ATM PIN with her husband and asked him to withdraw money.
This incident is enough for us to understand how it is important to follow all legalities to the core when it comes to financial matters. Legalities can be a huge roadblock and we as consumers might end up losing our hard earned money if we don’t follow them properly.
When it comes to bank accounts, insurance policies, mutual funds or any other investments, it is very important to have a nomination.
A nominee is a person in whose name assets, securities and other investments are transferred. He/ she receives the benefit of the wealth in case of death of the nominator. A nomination means to have the “legal” right to receive the asset and not to own it. A nominee can manage the assets as per the nominator’s wishes but cannot sell the assets unless he/she is a legal heir.
The purpose of saving, investing and having life insurance is to ensure that your family is protected financially after your death. It is important that they can access these investments and insurance quickly. Without a nomination in your insurance policy, your insurance company is not obligated to release the policy money. Your family need to obtain a Grant of Probate or Letter of Administration or Distribution Order, which may take several years. Having a nominee leads to fewer complications at the time of claim and distribution of the assets after your death. You can make the legal heir the nominee to avoid tedious procedures.
For most investments and insurance policies, you can fill out a form while applying with the particulars of the nominee. Witnesses may be required in some cases.