Nomination and a will answer two different questions. Nomination answers 'who should the institution hand this over to?' A will answers 'who owns it?' Confusing the two is the single most common cause of family disputes after a death in India.
What a nominee actually is
Across most Indian financial instruments, a nominee is a receiver and trustee for the legal heirs, not an automatic owner. The bank or fund house gets a valid discharge by paying the nominee; what happens to the money afterwards is governed by the will, or by succession law if there is no will.
There are narrow exceptions where nomination carries stronger effect — notably shares held in a company under Section 72 of the Companies Act, 2013, and certain co-operative society and provident fund contexts. Because the treatment varies by instrument and has been litigated repeatedly, treat nomination as a payout instruction and the will as the ownership document.
Instrument-by-instrument comparison
| Instrument | Effect of nomination | What decides ownership |
|---|---|---|
| Bank account / FD | Bank pays the nominee and is discharged | Will, or intestate succession law |
| Life insurance | Insurer pays the nominee; a 'beneficial nominee' (spouse, child, parent) keeps it | Will for non-beneficial nominees |
| Mutual funds | AMC transfers units to the nominee | Will, or succession law |
| Demat / shares | Nominee is vested with the securities | Nomination carries strong effect; still name it in the will |
| EPF / PPF | Amount paid to the nominee | Scheme rules and succession law |
| Property | No nomination in most cases (housing societies have limited nomination) | Will, or succession law |
The 'beneficial nominee' rule in life insurance
Section 39 of the Insurance Act, 1938, as amended in 2015, created the beneficial nominee. If the policyholder nominates a parent, spouse or child, that nominee is entitled to the proceeds beneficially — the money is theirs, not the estate's. Any other nominee, such as a sibling or friend, receives it as a trustee for the heirs.
Why 'I have nominations everywhere' is not a plan
- Nominations are scattered across a dozen institutions and are rarely reviewed after marriage, divorce or a death in the family.
- A stale nomination — an ex-spouse, a deceased parent — creates exactly the dispute you were trying to prevent.
- Nomination cannot distribute an asset between two people in unequal shares in most instruments.
- Nomination says nothing about liabilities, guardianship of minors, or anything non-financial.
What to do this month
- List every account, policy, folio and demat holding in one place.
- Pull the current nominee on each one — not the nominee you remember setting.
- Fix the stale ones directly with the institution; it is a form, not a legal proceeding.
- Write a will that names the same people, so nomination and ownership agree.
- Tell your family the list exists and where to find it. A perfect plan nobody can locate is not a plan.
Saarthi is a readiness and organization platform. It does not provide legal, tax, investment, or financial advice. Any generated drafts, checklists, or recommendations should be reviewed with qualified professionals before use.