During the life time, a person invest, purchase, saving accounts, mutual funds and build assets. These assets are sometime saved for some or the other future planning like marriage, purchasing house etc. These assets are also reason for dispute after the death of the person having ownership. Usually a nominee is selected by the person while entering or investing into any policy or investment. And where the nominee is not appointed due to any reason the legal heir of the person are the beneficiaries.

THE DISPUTE

The dispute between Nominee and Legal Heir arises where the name of the nominee is present amongst other legal heir or where the nominee is not the legal heir.

STATUS OF NOMINEE AND LEGAL HEIR

As per Merriam Webster a nominee is ‘a person named as the recipient of a grant, conveyance, or annuity’.

Whereas a legal heir is ‘one who receives property from an ancestor: one who is entitled to inherit property’

As per the definition the nomine is just a recipient of the property and has no legal claim over the property where as a legal heir is the one who is entitled to get the property and can use it for his own use.  There is a constant dispute on entitlement of assets of deceased between the legal heir and a nominee some of which have been resolved by the court.

In Shakti Yezdani v. Jayanand Jayant Salgaonkar 2016 Hon’ble Bomaby High Court stated that “the nominee of a holder of shares or securities appointed under Section 109A of the Companies Act, 1956 is not entitled to the beneficial ownership of the shares or securities subject matter of nomination to the exclusion of all other persons who are entitled to inherit the estate of the holder as per the law of succession”

The court further clarifying the status of nominee stated that the nomination of a person does not override the law of testamentary or intestate succession in India. The theory behind nomination is to protect the rights of the deceased person till the time legal representatives take responsibility.

IMPLICATION

The Bombay High Court judgement has made it very clear that nominee in pursuance to the nomination of deceased is nothing but just hold a status of trustee on the behalf of the legal heirs bearing responsibility of assets any matter related to succession or inheritance is decided.

Situation:- A man nominated his mother as a nominee for his FDs in a bank account. Upon his death the saving and deposits of his bank account will devolve upon his legal heir which will include his wife and children if any, but a dispute can still arise if the mother refuses to release the assets to the children or wife.

STATUS OF DIFFERENT ASSETS AND DEPOSIT

1. Deposits in bank:- The Reserve Bank of India has stated that on the demise of an account holder, the balance will be released to nominee as a “trustee of the legal heir of the deceased”.
2. Mutual Funds:- As in the case  of bank the nominee will get the investments of mutual funds holder as a “trustee” until the legal heir of the deceased does not claim them.
3. Listed shares:- In this case as well the claim over the listed share will be that of legal heir excluding the nominee.  
4. Public Provident Fund:- in this the nominee is handed over the custody of account and the legal heir of the deceased have the right.
5. Insurance:- In the year 2015 amendments were made in the insurance law as per which the term ‘beneficiary nominee’ was introduced. As per this this term now a person can jointly orseparately add the name of the people whom he want to give the benefit and this nominee is not just a trustee as in other cases but a rightful beneficiary. This will also exclude any other legal heir.
6. Employment Provident Fund:-  Not like other cases, in this a person who is appointed as nominee will have the rights over the EPF excluding legal heir also EPF rules a family member has to be the nominee.

HOW TO AVOID DISPUTE

The dispute between a legal heir and nominee can be avoided easily if proper succession plan are drawn out. While nominating anyone as a nominee one must consider their legal heirs first so that when the assets are released there is no delay. Further where a person want to include certain people and exclude other there should be a proper will which determine as to what share is held by whom creating no space for conflict. Further a person can also create separate accounts for children which can later be transferred through will. A will having legal heirs as their nominees are considered to be more reliable and harmonised.

CASE LAW:- The Hon’ble Supreme Court in  SARBATI DEVI and Anr V. Smt USHA DEVI 1983 held that a nominee through nomination cannot hold the same position as that of a will. As nomination and will are two different concept and both hold different status as Indian Succession act a  nominee can never be considered to be the owner of the property but he just a trustee.

CASE LAW:- In Shipra Sengupta v Mridul Sengupta (2009) the Hon’ble Supreme Court held that “the position of nomination is no longer ‘res integra’ and the nominee is entitled to receive the benefit, but the amount so received is to be distributed according to the laws of succession among the legal heirs. Thus a nomination does not grant any beneficial right on the nominee”.

CONCLUSION:-  A nomination has not  status as compares to ownership and thus is nothing mere a protection of assets of the deceased till the actual  owner claims or takes over the possession. Various judgments have made it crystal clear that nomination of a person cannot afford him the equivalent to that of the owner. The most prudent decision could be to make a will defining the status of person to hold his assets.