Nominations vs Wills: What's the Difference

During the course of one’s life, it is apparent for one to make multiple investments in various types of asset classes with the objective of generating wealth for themselves and their loved ones to use. While it is true that the ownership of these assets will be decided by the owner until he or she is alive, but when they meet their unfortunate and inevitable end, things like distribution of assets amongst the beneficiaries of the owner might become problematic. In this article, we will understand the difference between Nominations and Wills, two legal documents which help in settling such matters.

Nomination and wills are two legal instruments that are used to specify how a person's assets and property should be distributed after their death. While both nomination and wills serve similar purposes, they are distinct legal instruments with some key differences. It is important to understand these differences in order to choose the alternative that is most appropriate for one’s needs.

Understanding Nomination

Nomination essentially refers to the process that is used to designate a person or persons to receive the assets and property of an individual after their death. Nomination is commonly used in the context of financial assets, such as bank accounts, insurance policies, and stocks, where the nominee is designated as the recipient of these assets upon the death of the policyholder or account holder.

One of the characteristic advantages of nomination is that it allows the policyholder or account holder to specify the recipient of their assets without the need for probate, which can be a time-consuming and costly process. Probate is the legal process of administering a will, and it involves proving the authenticity of the Will, paying off the decedent's liabilities and distributing the remaining assets as per the Will. By avoiding probate, nomination can help to streamline the process of transferring assets after death and reduce the potential for disputes or delays.

Additionally, nomination allows the policyholder or account holder to specify the recipient of their assets in a clear and straightforward manner, which can help to avoid disputes and confusion after their death.

However, there are also some limitations to nomination. For example, nomination does not allow the policyholder or account holder to specify the manner in which their assets should be distributed, or to place any conditions or restrictions on the distribution of their assets. This means that the nominee is entitled to receive the assets in question outright, but asset needs to be distributed as per the legal rules or conditions of the Will. Additionally, nomination does not cover all types of assets like property, business etc.

Understanding Wills

A will is a legal document that specifies how a person's assets and property should be distributed after their death. A will allows the testator, that is the person making the will, to specify the recipient of their assets, as well as the manner in which these assets should be distributed. Wills also allow the testator to place conditions or restrictions on the distribution of their assets, and to appoint an executor who is responsible for carrying out the terms of the will and managing the estate.

One of the main advantages of a will is that it allows the testator to have greater control over the distribution of their assets after their death. A will can be used to specify the recipient of specific assets, such as real estate, personal property, and financial assets, and can also be used to provide either for dependents or for charitable causes. For example, a will can be used to specify that a certain asset should be sold and the proceeds obtained through the sale should be used to provide for the testator's children. As another example, it can also be specified that a certain asset should be held in trust for the benefit of a beneficiary until they reach a certain age.

A will, as compared to a nomination allows for a more room and a customizable approach of distribution of assets which can cater to specific needs and requirements according to the scenario, as perceived by the creator of the will. As an example, one may not want to equally distribute the family’s assets amongst the siblings but in certain differing proportions according to their age and perceived requirements.

Difference between a Nomination and a Will

First and foremost, it should be understood that a nomination is not a will. When a nomination has already been filed, it is usually believed that nominee becomes the successor of the assets owned by the original holder who has since deceased. But in 1984, a ruling by the Supreme Court of India stated that ‘A nominee is a mere trustee with whom society can deal initially after the death of a member. Deceased members' legal heirs have a succession right to the property of the deceased member and a nominee cannot refuse that to other legal heirs’. In some cases, it might be possible that the nominee and will are available for an asset. In such a case, it should be remembered that the provisions of a will preside over that of a nomination at all times.

Summary

Nomination and wills are both legal instruments that are used to specify how a person's assets and property should be distributed after their death. Nomination is commonly used in the context of financial assets, and allows the policyholder or account holder to specify the recipient of their assets without the need for probate. Wills, on the other hand, allow the testator to specify the recipient of their assets and the manner in which these assets should be distributed, as well as to place conditions or restrictions on the distribution of their assets. Both nomination and wills have their own advantages and limitations, and it is important to carefully consider which option is the most appropriate for your needs.