Financial Planning
Nominee vs beneficiary: Know the difference to save legal drama
When you get an insurance policy or make an investment, you may need to name a nominee or designate a beneficiary. A lot of people use the terms interchangeably, misunderstanding them to be the same, but they are not. Let us find out the difference.
What is a nominee?
A nominee is designated to manage your accounts and assets after your death. Imagine a nominee to be an interim guardian of your property until the legal guardian or heir is identified. Once they are identified, the nominee has to hand over the assets or proceeds to them.
What is a beneficiary?
A beneficiary is the one who legally holds your property upon your death. Unlike nominees, beneficiaries have total rights to your property. Nobody can object to their claim as the law fully supports them.
Key differences between nominee and beneficiary
| Feature | Nominee | Beneficiary |
|---|---|---|
| Legal status | Temporary custodian | Legal owner |
| Claim challenges | Can be challenged by legal heirs | Cannot be challenged by others |
| How to name | Through forms provided by banks/insurers | Through a legally valid will |
| Control over assets | Limited control | Complete control |
| Legal protection | Less protection | Strong legal protection |
Why do these differences matter?
The difference is most important when there are family disputes. Suppose Sanjay designated his sister as the nominee of his bank account but excluded her from his will. Upon his demise, his wife and children can sue for that money in court, despite his sister being the nominee.
This is because:
- Nominees hold assets only until legal heirs take possession
- Legal heirs are preferred over nominees in legal disputes
- In the absence of a will that identifies the same individual as a beneficiary, nominees do not have strong claims
Conclusion
Understanding the difference between nominees and beneficiaries is important to ensure your loved ones are protected and your intentions are honored. This will help you draft a will exactly as per your preferences. This way, your family is spared possible legal disputes, and your hard-earned wealth gets to the correct hands when you are not around anymore.
Disclaimer: This article is intended solely for
informational purposes. The views expressed in this article are personal. Axis
Bank and/or the author shall not be liable for any direct or indirect loss or
liability incurred by the reader arising from reliance on the content herein.
Readers are advised to consult a qualified financial advisor before making any
financial decisions. Axis Bank does not endorse or guarantee the accuracy of
any third-party content or links included in this article.
Mutual Fund investments are subject to market
risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is
acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase
of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked
to availment of any other facility from the Bank. This content is for
informational purposes only and does not constitute investment advice. Past
performance is not indicative of future returns. Readers are advised to consult
a qualified financial advisor before making any investment decisions. Terms and
Conditions apply.
making any financial decision.
Table of Contents
Related Services
Learning Hub
Look through our knowledge section for helpful blogs and articles.
Copyright@ 2025 Axis Bank