Neha Pathak, Head of Trust & Estate Planning at Motilal Oswal Private Wealth, and Bijal Ajinkya, Partner at Khaitan & Co, on Wednesday, November 29, shed light on the role of nominations in managing assets, particularly in mutual funds and demat accounts.

Ajinkya clarified that a nominee doesn't hold ownership rights even after the original holder's passing. Instead, they act as trustees until the lawful heir is determined under succession laws. The discussion underscored the prevalent practice of hastily assigning nominees without due consideration. Ajinkya cautioned against this practice, advising alignment between nominees and heirs in wills to avoid potential disputes.

This conversation coincides with the ongoing discourse prompted by the Securities and Exchange Board of India (SEBI). SEBI has mandated all mutual fund investors to either furnish nomination declarations or opt out of nominations by December 31. Failure to comply with this deadline might result in SEBI freezing debits from investor holdings, effectively preventing withdrawals from mutual funds.

While existing investors who have previously provided nomination details are exempt from resubmitting, those who haven't yet submitted nominations must act promptly to avoid complications.

Nomination is important as it helps in transferring of assets to a nominated individual in the event of the investor's demise, thereby avoiding prolonged legal processes.

Pathak added clarity to the concept of nomination, defining it as a designation for a specific person concerning a particular asset or property. She emphasised the flexibility of nominations, allowing owners to modify nominees at their discretion. Additionally, Pathak differentiated between nominees and legal heirs, highlighting the significance of personal laws like the Hindu Succession Act and Sharia law in determining legal heirs.

"The law is crystal clear that the nominee isn't the owner," Pathak said, stressing the importance of having a will to avoid ambiguity regarding asset distribution.

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(Edited by : Anshul)