Don't harass your children!

Without proper nomination, your heir will have to make frequent court visits and spend on lawyer's fees

Eight years after his parents’ demise, a frustrated Rajeev Agarwal almost gave up his claim to their bungalow in Bandra. The reason: The bitter court battle that ensued between the four brothers after their parents’ death had already cost him over Rs 3 lakh as lawyer’s fees. Being a school teacher in the outskirts of Mumbai, he felt the battle was not worth it, both financially and emotionally, anymore.

“Besides the monetary burden, it was painful to see brothers fighting like cats and dogs. We would not meet for any festival, and only look at each other with bitterness during the court visits,” said Agarwal, who did not wish to be identified for this story.

 

His lawyer did not blame the brothers, but the parents. He reasoned the parents did not have the foresight to nominate and divide the property between the brothers, leading to this fracas – after all, no one would want to let go of a property worth Rs 20 crore. And then, there were bank lockers with their mother’s jewellery and documents of other investments.

The financial sector has become alert to the problems caused by the absence of nomination. No wonder, bank executives, mutual fund distributors and insurance agents, all insist on a nomination when you are buying any product.

It was only on his banker’s insistence that Sunil Jadhav started appointing his only son as nominee to his investments. But it made little sense to him. “Anyway, all my assets will go to my son, so why bother?,” reasons Jadhav. But in the absence of a nomination, others can stake claim to these.

An account can have one or more nominees and it can also be a minor. You can always add or delete or modify a nomination any number of times. But, always ask for an acknowledgement after the filing of a nomination form. In the event of demise of the accountholder, the financial institution hands over the proceeds to the nominee on producing the death certificate. A nominee is simply a custodian for most assets, except in case of equities.

But, if your parent(s) has not nominated anyone on his/her investments, the ease of being able to claim the money from a financial institution may be much more complicated. It can start with the smallest of things, like claiming the amount in the bank. If the amount is less than a certain figure (Rs 1 lakh in the case of bank accounts including Public Provident Fund account), the spouse (if surviving) and child/children have to give an indemnity to the financial institution declaring that they are the legal heirs, says Ameet Hariani, managing partner of Mumbai-based Hariani & Company.

WHO WILL GET YOUR MONEY?

• BANK ACCOUNTS: Reserve Bank of India (RBI) guidelines specify that the deceased's nominee would receive the money in the capacity of a trustee, of legal heirs. The same applies for all other financial transactions such as public provident fund, mutual funds and others where the nominee plays the role of a trustee rather than the owner.
   
• INSURANCE: Section 39 of the Insurance Act says the appointed nominee will be paid, though he/she may not be the legal heir. The nominee, in turn, is supposed to hold the proceeds in trust and the legal heir can claim the money.
   
• STOCKS: Under Section 109A of the Companies Act, if the nomination is made under procedure prescribed by law, the nominee will be entitled to become the rightful owner of shares. And, such right shall exclusively favour the nominee and exclude all other persons.
   
• PROPERTY: Section 30 of the Maharashtra Co-operative Societies Act says in event of the death of a member of a society, the shares of the deceased will be transferred to the nominee. But, this transfer cannot result in vesting of the flat with the nominee. He/she is merely a trustee for the deceased's estate. But that's not the final word.
   
• SELF-ACQUIRED PROPERTY: A will is the deciding factor. In its absence, the property will be classified as 'inherited property'. "The property, consequently, will have to be shared equally between the successors
   
• JOINT OWNERSHIP OF SELF-ACQUIRED PROPERTY: The surviving owner becomes the sole owner.
   
• INHERITED PROPERTY: All members of the immediate family will get an equal share of the pie.

In case the money in the account is more than the threshold limit allowed by financial institutions, then the survivor(s) of the deceased will have to produce a will and the division will happen accordingly, says P S Dhingra, CEO, Dhingra Group of Consultants.

The will has to have a probate which indicates that it is the last and final will of the deceased. It is granted with the court seal and has a copy of the will attached to it. A probate mentions the beneficiary of the asset (may or may not be the legal heir) along with the legal heir(s)’ saying that the beneficiary is entitled to the money and has been agreed upon by all the parties mentioned above, explains Hariani.

The Court may charge a percentage of the value of assets as a fee to issue a probate. For instance, in Maharashtra around four per cent of value is charged for assets worth anywhere between Rs 50,000 and Rs 2 lakh and seven-eight per cent is charged for assets over Rs 2 lakh.

But if there is no will in place, the survivor(s) needs to file for a letter of administration or succession certificate. The survivor(s) can file for a succession certificate with the court. All you need to do is prove your relationship with deceased and investment documents. You can produce a copy of ration card, education certificate(s), PAN or passport as relationship proof as all these documents mention either father’s or husband’s name. Your cost would be a percentage of the value of the asset for a succession certificate.

As for Agarwal, the court decided to divide the money and property among the four brothers after 10 years. No wonder, he has already prepared a will for his two daughters.