When planning your finances, you usually focus on choosing the right investments, returns, and tax benefits. But what happens to these investments if something unexpected happens to you? That’s where a nominee comes in. Think of a nominee as the person who will help carry out your financial plan even in your absence. Whether it’s your mutual fund investments, bank FDs, or your PPF account, assigning a nominee ensures your money is transferred smoothly to the right person.
In this article, we’ll break down what a nominee really means, which investments offer a nomination facility, and why it’s an essential part of financial planning that most people overlook until it’s too late.
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What is a nominee?
A nominee is someone you officially appoint to receive the benefits of your investments after your death. In simple terms, this person acts as the custodian of your money not necessarily the owner—until the rightful heir or legal process takes over. If the nominee is also the legal heir, then they’re entitled to receive the funds fully. Otherwise, their role is limited to safeguarding and facilitating the transfer.
Nominees are usually close family members, like a spouse, parent, or child, but you can appoint anyone you trust. While it’s a straightforward concept, many people still skip this crucial step, not realising the complications their loved ones might face later. Assigning a nominee protects your assets. But choosing the right financial product determines how much they’ll receive. Compare Mutual Fund Options Now!
Understanding nominees with an example
Let’s say you invest in a mutual fund and nominate your spouse as the nominee. If something unfortunate happens to you, your spouse won’t need to go through time-consuming legal procedures to claim the corpus. The nomination allows for faster access to the funds. However, if your legal heirs contest the distribution and the nominee is not the legal heir, the final ownership may still be determined by succession laws.
In India, you can nominate someone for various investments like savings accounts, fixed deposits, Public Provident Fund (PPF), and mutual funds. This ensures a smoother transition of assets, helping avoid disputes and delays during an emotionally difficult time.
Why is nomination important?
We often assume that our investments will naturally pass on to our loved ones—but without a nominee, that process isn’t always straightforward. Nomination is not just a formality; it’s a safety net for your family. It ensures your investments reach the people you intended—quickly and without legal hurdles.
If you haven’t appointed a nominee and something happens to you, your family may have to produce succession certificates, legal heirship documents, and go through court processes. This can be emotionally and financially draining. By nominating someone, you eliminate that chaos. It’s a simple yet powerful way to protect your family’s access to what you’ve built.
What are the investments for which you can assign a nominee?
Nomination isn’t limited to just one or two types of investments—it’s widely supported across most financial products. Here are some where you can and should assign nominees:
Life insurance policies: The nominee receives the death benefit, ensuring financial stability for your family.
Bank accounts: Regular savings and current accounts offer nomination facilities so that the account balance is handed over easily.
Bank fixed deposits: You can appoint a nominee while opening the FD or even later. They’ll receive the maturity amount or corpus upon your demise.
Public Provident Fund (PPF): Most PPF accounts allow nomination, excluding minor accounts.
Mutual fund investments: Fund houses allow nomination of one or more people to receive units or proceeds if the investor passes away.
Adding a nominee to each of these helps create a financial safety bridge for your loved ones when they need it most.
Do you have to make a nomination for all your investments?
Technically, no—it’s not mandatory to appoint a nominee for all investments. But skipping this step can complicate things in the future. It’s a case of “better safe than sorry.” Nomination makes asset transfer seamless, while the absence of one could mean paperwork, delays, and possible disputes.
SEBI’s updated rules now require investors opening new mutual fund folios or Demat accounts after March 31, 2023, to either nominate someone or explicitly opt out. While older accounts remain unaffected for now, not making a nomination is strongly discouraged.
In short, even if it's not always required by law, nominating someone is highly recommended as a responsible financial habit.
How many nominees can you appoint?
The number of nominees you can assign depends on the type of investment you’re making. While some instruments allow only one nominee, others let you list multiple beneficiaries with specific share allocations. Here’s a quick breakdown:
Life insurance policies: You can nominate multiple individuals and divide the sum assured among them in specific proportions.
Bank accounts and FDs: Usually limited to one nominee per account. However, you can appoint different nominees for different accounts within the same bank. The RBI is also considering a proposal to allow up to four nominees in deposit accounts.
Public Provident Fund (PPF): More than one nominee is allowed, but you must declare each one’s share in percentage terms.
Mutual funds: As per SEBI rules, a maximum of three nominees can be registered per folio. You must also specify the percentage share each nominee will receive. Mutual fund nominations aren’t just about protecting wealth—they’re about passing on smart, high-growth decisions. Start Investing or SIP with Just Rs. 100!
Can you change your nominee at a later point in time?
Absolutely. Life changes—and so can your nominee. Whether it’s due to a shift in family dynamics, updated estate planning goals, or simply a change of heart, most financial institutions and investment platforms allow you to revise, update, or even cancel your nominee at any time.
For bank accounts and FDs: You’ll typically need to visit the branch, fill out a nomination change form, and provide identification.
For mutual funds: The process is even easier—many AMCs allow you to update nominees online through their portals or physical forms.
For insurance policies and PPF: Nominee changes are also permitted but may require additional documentation like a policy update form or identity verification.
As life changes, so do our priorities. Bajaj Finserv Mutual fund platforms now let you update nominations online giving you flexibility with both your investments and their future recipients. Open Mutual Fund Account Now!
Benefits of having nominees in investments
Designating a nominee is more than just ticking a box—it's about safeguarding your family's future. Here’s why:
Smooth asset transfer: Nomination ensures that your investments go directly to your chosen individual(s), reducing delays and legal hurdles.
Avoids court intervention: Without a nominee, your family may need to obtain succession certificates or legal heirship documents, which can be time-consuming and stressful.
Honours your intent: It helps ensure your money is used for the purpose you envisioned—whether it's your child’s education or your spouse’s retirement fund.
Operational efficiency: From the institution’s perspective, having a nominee makes the settlement process faster and more efficient.
Provides financial security: During emotionally difficult times, immediate access to funds can be a lifeline for your dependents.
Key takeaways
A nominee is a person chosen to act as the custodian of your investments after your demise.
Nomination does not give ownership rights unless the nominee is also the legal heir.
Most common financial instruments such as savings accounts, fixed deposits, PPF, and mutual funds allow nominations.
Having a nominee ensures that your assets are transferred smoothly, without legal complications.
You can update or change your nominee at any time as per your evolving preferences.
SEBI mandates nomination (or opting out) for all Demat and mutual fund accounts opened after 31 March 2023, reinforcing the importance of nominations in wealth planning.
Conclusion
Nomination is one of the most critical yet often overlooked elements of financial planning. Whether you’re investing in mutual funds, maintaining a savings account, or building a retirement corpus through FDs or PPF, listing a nominee ensures your wealth doesn’t get locked in legal complexities after you're gone. By clearly identifying who should receive your investments, you provide your loved ones with timely financial support and peace of mind. It’s a small step with a big impact protecting both your legacy and your family’s future.
If you have mutual fund investments, you should enlist nominees for the same by contacting your DP. However, if you haven’t started investing in MFs, you can do so via the Bajaj Finserv Mutual Fund Platform. This smart and intuitive platform allows you to compare 1000+ mutual funds and start with simple SIP investments of Rs. 100 only!
