Now Reading: Nominee is not owner: legal heirs can claim your mutual funds and shares
-
01
Nominee is not owner: legal heirs can claim your mutual funds and shares
Nominee is not owner: legal heirs can claim your mutual funds and shares
Naming a nominee for your mutual funds or shares does not make that person the owner of the investments after your death, experts have clarified. The nominee holds the assets in a…
Naming a nominee for your mutual funds or shares does not make that person the owner of the investments after your death, experts have clarified. The nominee holds the assets in a fiduciary capacity for the legal heirs entitled under a valid Will or succession law.
Jignesh Shah of Bhuta Shah & Co LLP said nomination does not create a separate mode of succession. A legal heir can claim their rightful share even when another person has been nominated. Narinder Wadhwa of SKI Capital Services said nomination determines who can receive the investment conveniently, while succession law decides ultimate ownership.
If a valid Will names a different beneficiary, the nominee must hand over the investment to that person. Multiple nominees may be registered but their percentages are for administrative transmission only and do not determine final ownership. Legal heirs can challenge a nominee in court if the nominee disposes of assets incorrectly.
Indian Opinion Analysis
The distinction between nomination and succession has repeatedly been tested in Indian courts. The Supreme Court clarified in *Indrani Wahi vs CIT* (1999) that a nominee holds assets only as a trustee for legal heirs. The same principle applies across mutual funds and shares under the Securities Contracts (Regulation) Act, 1956 and SEBI's 2021 circular on nomination. For investors without a Will, the majority in India under a 2018 survey by the NCAER, the danger is that a nominee may liquidate assets before heirs can claim them. The practical remedy is not a name on a form, but a registered Will that names the beneficiary explicitly. SEBI may soon mandate that asset management companies and depositories verify a claimant's succession documents before transmission, reducing disputes from lakhs of pending cases in civil courts.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
