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This article was first published 9 years ago  » Business » Why you should choose a young nominee for your investments

Why you should choose a young nominee for your investments

By Neha Pandey Deoras
November 05, 2014 17:41 IST
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Some of the concerns we reflect on before investing: Whether or not to make the investment?

Will it be helpful? Where to invest? What amount to invest?

However, nomination for an investment is mostly a process that people hardly think about.

In most cases, a nominee is either a child, spouse or a parent.

Reason: The money will go to any of these people in the event of the investor’s death. However, appointing a nominee should be a well-thought process.

Kartik Jhaveri of Transcend Consulting suggests one invests jointly.

It’s easier to handle such investments if either of the investors is not there.

“But if one cannot, then one should choose a nominee who is much younger. Ideally, it should be their adult son or daughter. If not, only then should one choose a minor,” he said.

Certified financial planner Pankaj Mathpal said he avoids suggesting minors as a nominee.

“This is because a nominee is a trustee for investments or assets and, therefore, should be mature enough to be able to handle money matters.”

If a minor has to be made a nominee, the nomination should also have the details of a guardian also. One should also avoid nominating parents because they are more likely to die before the investor.

One usually nominates a parent(s) when one is young or unmarried. However, it is essential to change the nominees once the investor gets married or the parents die.

For those who are single without any next of kin, it would be better to nominate a close and trusted cousin or a niece or nephew, to whom an investor would like to pass on their assets.

A charitable organisation supporting a cause close to the investor’s heart can also be a nominee.

It is essential to ensure the space for a nominee on an investment form should not be left blank — that’s worse than making a bad nomination.

If you have more than one beneficiary and you want to ensure all of them get an equal share of your assets then — certified financial planner Malhar Majumder suggests — you should write down your assets and liabilities.

“This helps you to be aware of your total assets, which most people aren’t even aware of. It also shows how much is being nominated and to whom. You can then take a call on changing the nomination if you want to,” said Majumder.

While a nominee need not necessarily be the legal heir, in India, most nominees are heirs. You could also decide based on the investment instrument.

For instance, in the case of equity investments, a nominee is considered to be the legal heir and not just a trustee. Hence, you may want to nominate your legal heir on equity investments.

This can be changed only if there is a will in place and it says that the money needs to go to someone else. Similarly, some instruments like the mutual funds allow more than one nominee.

In such cases, it is a good idea to clarify the proportion in which the money needs to be distributed between the different beneficiaries, say between a spouse and two heirs.

If you can appoint only one nominee it is a good idea to opt for your spouse. Despite everything, it is helpful to have a will to support the nomination.

This has additional benefits.

It helps apprise the nominee or the guardian about who is the nominee, who is the heir and what to do with the money, especially if the heir or nominee is underage, said Majumder.

In case of a property bought on a loan, the owner needs to specify if the nominee will be transferred the dues along with the property. Of course, the will can be challenged anytime.

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Neha Pandey Deoras
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