How should you nominate investment beneficiaries?

Posted by: Arti Bhargava on Aug 28, 2017, 06.30 AM IST

Sales executive Avinash is a 48-year-old father of two. He and his wife are keen to get their daughter married. Their son is in Class XI, and plans to go abroad for his undergraduate studies. Avinash's parents are dependent upon him and he provides them a monthly income.

He has been a good provider and has made sure that his family's needs and wants have been taken care of very well. Of late, Avinash has been getting mails and advice to nominate beneficiaries for the investments he has made. What are the things that Avinash must consider while making nominations?

Avinash should ensure that the money he is saving for his financial goals can be accessed by the right people at the right time, in the unfortunate event of his death. Nominations and joint holdings are two of the simplest ways of identifying beneficiaries for investments made. As far as possible, Avinash must ensure that the beneficiary is someone whose needs will be taken care of by the specific investments in future.

For example, he can earmark some of his mutual fund investments for his son's foreign education and make him the nominee. Similarly, his parents can be the nominee for his investments in fixed deposits and small savings schemes and his wife the nominee for his insurance policies. In this way he will make sure that the sum of money earmarked for his dependents' needs are available to them without the stress of disputes even in his absence. It would be good if Avinash maintained a dossier of his investments and kept track of the nominations he has made. If he makes any change in the nomination, he should update this record too so that there is no confusion.

Since situations and needs change, periodically reviewing the nominations made is good practice. It ensures that the nomination continues to be relevant. Informing the nominees that they have been nominated is also a good practice since the point of smooth transition is otherwise lost. If there is a facility for more than one joint holder or multiple nominations in a product, he must use it so that the investment is protected even if one nominee passes away.

If Avinash plans to write a will, he must make sure that the provisions of the will are in line with the nominations made. Otherwise it will lead to disputes and the provisions of the will can take precedence over the nominations. By taking these steps, he can make sure that the financial interests of his family are protected even if he is not there to manage it.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Aug 28, 2017, 06.30 AM IST