According to law, a nominee is a trustee and not the owner of the assets. In other words, he is only a caretaker of your assets. The nominee will only hold your asset as a trustee and will be legally bound to transfer it to the legal heirs. For most investments, a legal heir is entitled to the assets of the deceased. A legal heir will be the one whose is mentioned in the will. However, if a will is not made, then the legal heirs of the assets are decided according to the succession laws, where the structure is predefined on who gets how much.
"Nomination is the right to receive, will is the right to own except in case of equity shares where nomination prevails," Mashruwala added.
Below is the edited transcript of the interview
Q: What is the difference between a will and a nomination? What are the circumstances under which either should be used?
A: From simple man's language perspective, a nominee is somebody who receives the asset upon death of a person. However, the nominee cannot own it. Let me simplify that. Say, if a husband has nominated his mother in life insurance policy. Upon his death, the entire proceeds of life insurance will go to the mother, but the mother can't own it if a will has something contrary written. If the will says that a portion of or the entire asset should go to his wife and children then the mother will have to part with that.
Nomination, in simple language, is the right to receive. But a will shall decide who will eventually own the asset. In case there is no will then there is Indian Succession Act, Hindu Law, Mohemmadan Law etc. Summing up, nomination is the right to receive, will is the right to own except in case of equity shares where nomination prevails.
Q: If a person were to nominate for all his assets, would he then need a will?
A: If, for example, a person has said that he is nominating all his assets to his brother, but in a will, he writes something different or if there is no will then based on the Indian Succession Act, Hindu Law or Mohemmadan Law, the brother will receive all the assets but he will have to distribute it. If there is a will and it says that the entire asset will go to his brother, then the brother will own it. But if the will says anything contrary, the brother will probably more act as a trustee holding onto assets till the final will is out. If there is no will then the nominee will hold onto the assets and it becomes his.
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