Nominations, Beneficiaries, and Key Will Terminology Explained
In the first part of this series, we explored why everyone needs a Will and addressed some common excuses for avoiding it. Now, let’s dive deeper into some common misconceptions about nominations and beneficiaries—and explain some of the jargon you’ll often come across when drafting or discussing a Will.
This post is the second in a five-post series. Here is the link to the first blog "Make your Will now"
Nomination vs. Inheritance: What’s the Difference?
A common belief is that nominating someone for your bank account, insurance policy, or flat automatically makes them the owner. That’s not strictly true.
- Nominee: A nominee is essentially a caretaker or custodian. They are authorised to take possession of assets after your death but are expected to hand them over to the rightful legal heirs as defined in your Will (or by law, if there is no Will).
- Beneficiary: A beneficiary is the true owner of the asset, as specified in your Will.
๐ Example: If you nominate your spouse for your fixed deposit but name your children as beneficiaries in your Will, then legally, the children inherit the money—even though the spouse may initially claim it as a nominee.
Why Updating Nominations Matters
Over time, life changes—marriage, children, separation, or even the passing of a loved one. If you don’t update your nominations, they may no longer reflect your intentions.
- Always ensure your spouse’s name is included as a beneficiary.
- If your spouse passes away before you, update nominations for all non-joint investments or properties.
- In some cases, you may want to continue naming parents as beneficiaries, especially if they depend on you financially.
- In the event of separation or divorce, update your nominations and beneficiaries accordingly.
๐ก Tip: The simplest and most effective approach is to make the nominee also the beneficiary in your Will. This ensures smooth transfer of assets and avoids confusion.
Key Terms You Should Know
When dealing with Wills, you’ll often encounter terms that sound intimidating. Here’s a quick guide:
- Testator / Testatrix: The person making the Will (male/female).
- Beneficiary: The individual (or organization) receiving assets under the Will.
- Executor / Executrix: The person appointed to carry out the instructions of the Will. They ensure assets are transferred properly.
- Probate: Court certification of a Will as genuine and valid. Required in some cities (like Mumbai, Chennai, and Kolkata) or in cases of dispute.
- Administrator: Appointed by the court to manage assets if there is no valid Will.
- Codicil: An amendment or addition to a Will.
- Intestate: When someone dies without leaving a Will.
Practical Scenarios
- Joint Investments
- If you and your spouse hold assets jointly (like fixed deposits or mutual funds), they usually pass to the surviving holder automatically.
- Nominees step in only if both joint holders are no longer alive. You should support the nomination with a mention in the will, in the same manner as the nomination.
- Shares and Demat Accounts
- In most cases for shares and demat accounts, the nominee is treated as the legal heir. To avoid conflict, ensure the nominee and beneficiary named in your Will are the same.
- Special Bequests
- You may want to leave assets to a non-heir—like a relative, friend, or caregiver that might have helped you at some stage. Clearly mention this in your Will, otherwise the legal heirs may dispute it.
- Equitable Distribution
- Instead of constantly changing nominations, specify percentages and beneficiaries in your Will. Nominations only make transfer easier but do not override the Will.
Final Thoughts
Understanding the difference between nominations and beneficiaries is crucial. Many families face unnecessary disputes simply because these terms were misunderstood or left ambiguous.
Before you draft or revise your Will:
- Clarify your nominations.
- Align them with your beneficiaries.
- Learn the basic terms so you’re never in doubt.
In the next blog, we’ll explore how to actually draft your Will—what to include, how to structure it, and practical tips to make it clear and legally sound. The post is titled "Drafting a Will - Guidelines and tips"
This page is part of a 5 part series of posts. The complete indexed list of links is below.
Make your Will now – Part 1 of 5
Key terms in Making a Will- Nominations Beneficiaries Part 2of 5
Drafting a Will - Guidelines and tips Part 3 of 5
Without a Will - Burdens on your loved ones after you pass -Part 4 of 5
Living Will or Advanced Medical Directives - Post 5 of 5
No comments:
Post a Comment