Protect Your Family from Nominee Mistakes That Can Delay Your Wealth Transfer

Many people fill out the nomination form once and never think about it again. Life moves on, families change and new goals take shape. But if that small form has a mistake or an outdated name, your loved ones may face long delays and a lot of paperwork while trying to access your money.

A nomination is supposed to make things easier for your family, not more difficult. Still, small mistakes such as missing details, wrong names or old information can stop banks, mutual funds or insurance companies from releasing the funds quickly. The good news is that a few simple checks can prevent this stress and ensure your money reaches the right hands when it truly matters.

Why nomination mistakes are so risky

Nomination in bank accounts, mutual funds, demat accounts, insurance and provident fund is meant to make transmission smooth, but errors here often lead to:

Delayed claim settlement because institutions ask for extra documents or a succession certificate.

Family disputes when nominee and legal heir are different people or percentages are not clear.

Many Indians also assume that a nominee automatically becomes owner of the asset, which is usually not true for most financial assets. The nominee is typically a custodian who holds money for the legal heirs as per succession laws or the Will.

Nominee vs legal heir: the core confusion

The biggest trap is confusing a nominee with a legal heir.

A nominee is authorised to receive the money from the bank, AMC, insurer or depository on death of the investor, so institutions can discharge their liability quickly.

A legal heir is the rightful owner as per personal succession law or a valid Will and can legally claim the asset from the nominee if they differ.

So, if you name a friend as nominee in a mutual fund, but your Will leaves all assets to your spouse, the spouse can still claim those units from the friend. This gap between “receiver” and “owner” is where litigation and emotional damage often start.

Common nomination mistakes that hurt families

These errors are seen again across bank, demat, mutual fund and insurance nominations in India.

1. No nominee, or “will do it later”

Many investors open bank accounts, demat accounts or mutual fund folios without any nomination, assuming it can be added later.

In such cases, after death, heirs often need a probated Will, legal heir certificate, indemnity bonds, KYC, sometimes even a succession certificate to claim assets.

This can mean months of follow‑up with multiple institutions, especially where different banks and RTAs are involved.

Regulators have moved to reduce such gaps:

SEBI requires a “choice of nomination” (nominate or opt out by declaration) for mutual fund folios and demat accounts and has set deadlines for existing investors to update this.

RBI has told banks to clearly inform customers about nomination, and to record nomination status on passbooks, statements and deposit receipts.

So, from a practical view, keep a valid nominee for every major financial asset instead of opting out, unless there is a very clear estate plan with a Will and trusts.

2. Outdated nominees after life events

A very common problem is nominations that do not match today’s family reality.

After marriage, many investors forget to replace parents or siblings with their spouse or children where appropriate.

After divorce, separation, second marriage, or death of an earlier nominee, old nominations remain and the family gets a shock when they see names.

In Indian families this often leads to awkward situations where a distant relative or estranged sibling is still the nominee on a large mutual fund or FD. So, link nomination review to events marriage, childbirth, property purchase, new business, divorce, or death in the family.

3. Different nominees across assets without strategy

Many investors randomly name different people across bank accounts, demat accounts, mutual funds, EPF, PPF and insurance.

One child in mutual funds, another child in demat, spouse in insurance, parent in PF.

If there is no clear Will, each side believes “Papa meant this for me”, and disputes start.

4. Minor nominees without a trustworthy guardian

Parents often name minor children as nominees in mutual funds, insurance and demat accounts, but ignore the guardian field.

If the guardian is not clearly named, institutions will ask for additional documents or court orders.

If a wrong or irresponsible guardian is chosen, that person will control the money until the child becomes major.

So where you choose a minor, also:

Name a trustworthy guardian who understands money and whom you truly trust.

Ensure your Will names the same guardian or explains how that money should be used for the child.

5. No percentage split, or unclear percentages

SEBI rules now allow up to multiple nominees in mutual funds and demat, and banks also allow multiple nominees with defined shares.

People often write only names, but do not specify percentages, which can cause operational delays and disputes.

Some write uneven percentages that do not add up to 100%. This usually gets rejected or needs correction.

For smooth family experience:

Specify exact percentage for each nominee, totalling 100%.

Match these percentages with your Will, or clearly record why they differ.

6. Joint accounts and ignoring survivor rules

In joint bank accounts or mutual fund folios, many investors assume nomination is enough. But the mode of holding also plays a big role.

For “either or survivor” bank accounts, the surviving holder can operate, and the nominee comes in only after all holders are gone.

For joint mutual fund folios or demat accounts, SEBI’s mandatory “choice of nomination” requirement does not apply in the same way as single‑holder accounts.

This creates confusion when one holder dies and data is not synchronised. So review:

Mode of holding (single, joint, either or survivor).

Whether nomination is updated after a joint holder dies or exits.

7. Assuming nomination equals full estate planning

Many high net‑worth investors stop after filling nominees and skip a Will or trust, believing everything is sorted.

Nomination cannot override personal law or a registered Will; courts have repeatedly treated nominees as custodians.

Physical assets (real estate, gold, business) also need an estate plan, which nomination cannot cover.

So, treat nomination as the first layer of convenience, and a Will or trust as the main blueprint for long‑term wealth transfer.

Regulatory updates investors should know

In the last couple of years, both SEBI and RBI have tightened rules so that nomination is more visible and updated.

Key changes that affect you:

SEBI’s revamped nomination framework requires all new investors in mutual funds and demat to provide a “choice of nomination”, and existing investors are given deadlines to nominate or opt out, after which restrictions on transactions may apply.

New SEBI rules from March 2025 allow up to 10 nominees per mutual fund folio or demat account, with clear allocation and simplified documentation for transmission.

RBI’s new bank nomination norms from November 2025 require banks to educate customers about nomination, record status on account documents, and obtain a written declaration if customers opt out.

So regulators are nudging you to act, and using this push proactively can save your family time and stress.

How to fix nomination traps in a practical way

Think of this as a one‑day “family transmission audit”, just like a full car service before a long drive.

List all assets in one place

Bank accounts, FDs, RDs, lockers.

Demat accounts, mutual fund folios, PMS, bonds.

EPF, PPF, NPS, insurance policies, company ESOPs or RSUs.

Check current nomination status

Look for “Nomination Registered” or similar legend on passbooks, statements and MF account dashboards as required by new norms.

Note where there is no nominee or where nominee is outdated.

Align nominees with your real wishes

Decide who should ultimately benefit from each asset: spouse, children, parents, others.

For each asset, choose nominees and percentage split that reflect this plan, and keep it consistent across similar assets.

Update forms smartly

Use online channels of banks, brokers and AMCs where available to update nominees quickly.

For minors, add a trustworthy guardian. For multiple nominees, define clear percentages.

Connect nomination with your Will and family communication

Work with an estate planner or lawyer to write or update a Will that clearly lists major financial assets and intended beneficiaries.

Share a simple “asset map” with spouse or key family member: where accounts are held, adviser details, and how claims will work.

At Maxiom Wealth, the Roots & Wings philosophy is used not only for equity selection but also for family-level planning: strong roots through proper nominations, documentation and estate planning, and growth wings through disciplined, diversified portfolios. For clients in Hyderabad and across India, nominations are reviewed as part of periodic portfolio check‑ups so wealth transfer stays as efficient as wealth creation.

To sum up, you can use this knowledge immediately by blocking a weekend to review every nomination with your spouse and then aligning it with a written Will. A two‑hour, slightly boring paperwork session today can save your family months of running to banks, courts and registrars tomorrow.