Hi Sir,
My sister (unmarried and aged 82 years) recently expired. She had some investments in mutual funds through ICICI direct. She has some money invested in fixed deposits and some with bank savings account. She has made nominations in her investments in favour of couple of relatives.
She had made a WILL thereafter bequeathed her movable/ immovable
property to my wife. I am the only person surviving in her family.
I will like to know whether The beneficiary named in the WILL will get preference over nominees in getting her property. Thanking you
Pradeep Kumar
Ans: I truly appreciate your concern in handling your sister’s legacy with care and responsibility.
Handling investments after someone’s death needs clear understanding of rules.
Let’s go step-by-step in a professional and clear way.
You have raised a very important question.
The issue is about whether the nominee or the beneficiary in the WILL gets priority.
This is a common question when dealing with mutual funds, FDs, and bank accounts.
Let us study this matter from a 360-degree angle.
Difference Between Nominee and Beneficiary in a WILL
A nominee is only a caretaker or trustee of the asset.
The nominee holds the asset temporarily on behalf of the legal heirs.
The person mentioned in the WILL is the final beneficiary of the asset.
A nominee can collect the asset. But has no right to keep it.
A WILL has more legal power over a nomination.
As per Indian law, the person named in the WILL becomes the real owner.
So, even if the nomination is in favour of others, the WILL’s instructions will prevail.
Supreme Court and High Courts have confirmed this rule in many cases.
So your wife, as the legal heir through the WILL, becomes the real owner.
The nominee must hand over the asset to your wife.
What Happens to Mutual Funds in ICICI Direct
AMCs allow the nominee to claim mutual fund units first.
The nominee must submit the death certificate and nomination documents.
However, that nominee is only a custodian of the units.
If your wife is named in the WILL, she becomes the rightful owner.
If nominee refuses to transfer, then legal route through succession can be used.
The court will support the WILL beneficiary and not the nominee.
The Certified Financial Planner will help with paperwork and rightful transfer.
What Happens to Fixed Deposits and Bank Accounts
For FDs and savings accounts, bank will allow the nominee to withdraw the amount.
But, again, nominee does not own that money permanently.
As per Indian Succession Act, the money belongs to the legal heir.
Your wife must be given the FD and savings balance as per the WILL.
If nominee does not cooperate, legal action can be taken.
The WILL is a stronger document than the bank nomination.
Legal Process for Claiming the Assets
First step is to get the death certificate from municipal authority.
Then, obtain a legal heir certificate if required by financial institutions.
Submit the WILL along with affidavit and indemnity form.
Some banks or AMCs may ask for probate of the WILL.
Probate is court validation of the WILL. It is common in large cities.
Once probate is done, all assets will be transferred easily to your wife.
Certified Financial Planner can help coordinate these legal and financial steps.
Role of Nominee in Different Asset Classes
Mutual Funds: Nominee is a trustee only. Not final owner.
FDs/Savings Account: Bank allows nominee to receive. But must hand over to legal heir.
Shares/Stocks: Nominee can get shares. But ownership depends on WILL.
LIC/ULIP: Nominee gets money. But if WILL says otherwise, nominee must pass it on.
Always remember, nomination gives temporary holding, not ownership.
If LIC, ULIPs or Insurance-Cum-Investment Policies Are Present
If your sister had any LIC or ULIP policies, please check.
If these are investment-cum-insurance policies, it’s better to surrender.
The money received can be reinvested in mutual funds with better returns.
Insurance is not a good investment option. Separate insurance and investment is better.
Mutual funds provide more flexibility and higher long-term growth.
Why Mutual Funds Are a Better Option Post Inheritance
Mutual funds offer better growth compared to fixed deposits.
FDs give fixed but lower returns. Inflation reduces real value.
Mutual funds can beat inflation and build more wealth.
Choose diversified mutual funds guided by a Certified Financial Planner.
These funds are actively managed by skilled fund managers.
They give better returns than index funds which are passively managed.
Index funds just follow the market. They don’t protect from risks.
Actively managed funds adjust portfolio as per market changes.
That gives better risk-adjusted returns over long term.
Avoid Direct Mutual Funds – Use Regular Plan With Certified Financial Planner
Direct funds look cheaper, but lack professional support.
No guidance is given on fund choice, timing or rebalancing.
You may choose wrong fund or wrong category. That reduces performance.
A Certified Financial Planner gives ongoing monitoring and review.
He helps match your goal and risk profile with suitable funds.
Regular plan cost is slightly higher. But service value is much more.
You also get proper paperwork, tax help, and exit strategy.
This avoids mistakes and saves more money in long term.
How to Secure the Money Inherited
First, consolidate all money into one savings account.
Then, create a financial goal plan.
Short-term funds can be kept in liquid funds or ultra-short term funds.
Long-term money should be put in diversified equity mutual funds.
Avoid NFOs, PMS or fancy schemes. Stick to simple, consistent performers.
Never mix insurance with investment again.
Buy pure term insurance if protection is needed.
Use mutual funds for long-term goals like retirement corpus or emergency fund.
Tax Considerations After Inheriting the Money
In India, inherited money is not taxed in your hands.
However, any gains you earn from investing it will be taxed.
For mutual funds, gains after three years are taxed at 20% with indexation.
For FDs, interest income is added to your total income and taxed.
Proper structuring through Certified Financial Planner can help reduce tax burden.
Use tax harvesting methods to lower capital gain tax legally.
Estate Planning for the Future
After your wife receives the assets, create her WILL.
This avoids future confusion for your family.
Register the WILL with proper witness and signature.
Also update nomination in all new investments.
This helps smooth claim process and saves legal hassle.
A Certified Financial Planner can guide on succession planning and asset transfer.
Think long-term and plan for smooth wealth transfer across generations.
Avoid These Common Mistakes
Thinking nominee is final owner. This is not true.
Ignoring the importance of a registered WILL.
Investing in annuities, ULIPs or insurance-linked plans.
Going for direct mutual funds without expert help.
Putting too much in FDs and ignoring mutual funds.
Not taking proper probate where needed.
Not informing relatives about existence of WILL.
Finally
Your wife, as the person named in the WILL, has the legal right to the assets.
Nominees must transfer all the money and investments to her.
Use a Certified Financial Planner to support with documentation and investment planning.
Avoid direct and index funds. Choose actively managed mutual funds in regular plan route.
Keep insurance and investment separate for better financial health.
Create a proper plan for safe and tax-efficient handling of inherited wealth.
Secure the legacy left by your sister with professional care and future-ready structure.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Savio on Mar 13, 2024English
