What is a Nominee and why is it important to have a nominee?

Let's define nominee first!

A nominee is a person who receives the benefits of the account with which he is nominated after the account holder's death. Nomination allows an account holder to appoint an individual who will receive the benefits of the account after the investor's demise. It is always a good practice to make a nominee where you express your chosen one for your resources. Your resources could be a bank account, insurance, mutual funds, etc. 

You can choose someone close to you as your nominee for your investments:

Spouse, Parents, Sibling, Other family members and more.

Importance of having a nominee

Nomination ensures that your funds reach the right place i.e., your legal heir. 

If the nominee is not mentioned, money legally should go to the legal heirs of the account holder. This may sound simple on paper but this is a lengthy process in reality. You will need a lot of documents, including death and succession certificates and many times, a court order could be required.

For example, if you have a bank account and you have assigned a nominee, then in case of death, your nominee has the right to receive your money. The bank will simply transfer the funds to the nominee's account with very limited legal paperwork.

Having a nominee is compulsory when you open a Demat Account. Although it is not mandatory in the case of Banks and FDs, they are highly recommended.