It's the part of a financial plan nobody wants to think about, and the part that causes families the most avoidable pain: what happens to your investments when you're gone. Two small, free administrative steps — nomination and clear joint holding — prevent most of the mess. But there's a catch most people get wrong.
A nominee is a trustee, not an heir
This is the single most misunderstood point. When you nominate someone on a bank account, mutual fund, demat account, or insurance policy, you are not deciding who inherits the money. You're deciding who receives it on your behalf, to pass on to your legal heirs.
Actual ownership is decided by your will — or, if there's no will, by the succession law that applies to you. So a nominee is a convenient point of collection, not the final owner. If your nomination and your will say different things, the will (and succession law) governs the inheritance, even though the nominee received custody first. That gap is exactly where disputes begin.
Why nominate anyway
Because without a nominee, your heirs face a slow, document-heavy transmission process — succession certificates, indemnities, legal-heir proofs — to claim each asset. A valid nomination lets the institution release the asset quickly to a known person, who then distributes it as per your will. It removes friction at the worst possible time.
SEBI has, in fact, made nomination effectively mandatory for demat accounts and mutual fund folios — you either nominate or formally opt out. Don't opt out.
Three things to actually do
- Add (and update) nominations everywhere — bank accounts, every MF folio, demat, EPF, NPS, and insurance. Update them after major life events: marriage, a child, a divorce, a death in the family. A nomination still pointing to a parent or an ex-spouse years later is a common and painful error.
- Use joint holding deliberately. For mutual funds and demat, an "either or survivor" holding lets the surviving holder keep operating the account without transmission formalities. For a spouse, this is often the smoothest arrangement. Be clear about the holding mode when you open accounts.
- Write a will. Nomination handles custody; the will handles ownership. Even a simple, properly signed and witnessed will removes ambiguity and aligns with your nominations. For larger or complex estates, have it drafted professionally.
Keep a map your family can find
The cruellest version of this problem is wealth that simply gets lost — accounts the family never knew existed. Maintain a single, secure list of your accounts, folios, insurance policies, and where the documents are kept, and tell one trusted person it exists. Don't write passwords or OTPs in it; just enough for someone to know what to claim and where.
The point
You can't control much about this subject, but you can control the paperwork — and the paperwork decides whether your family inherits smoothly or spends two years and legal fees untangling it. Nominate, hold jointly where it makes sense, write a will, and keep a map. An afternoon's work, once, with the odd update — and a great deal of grief avoided.