Wealth protection in India is not just about creating assets but also about ensuring they pass smoothly to the right people. Many investors rely only on nominations, assuming their wealth is secure, but legal disputes and delays often tell a different story. Tools like nominations, wills, and trusts each play a distinct role in safeguarding wealth, and understanding how they work together is essential for effective financial planning.
This article explains nomination, wills, and trusts in simple terms, helping investors protect their assets, avoid family conflicts, and plan a legally sound legacy.
What Is Nomination?
Nomination is a facility provided under Indian financial laws that allows an account holder or investor to appoint a person who can receive the assets in the event of their death. The main purpose of nomination is to ensure a smooth and quick transfer of assets without procedural delays.
In simple terms, a nominee is a person authorised to receive money or securities from a bank, financial institution, or insurer after the investor’s demise. Nomination helps institutions identify whom to hand over the asset to, but it does not decide the final ownership of that asset.
For example, suppose you have a savings bank account and nominate your spouse as the nominee. If something happens to you, the bank will release the money to your spouse quickly and without legal delays.
Nomination applies across most financial products in India, including:
- Bank accounts, such as savings, current, and fixed deposits
- Demat accounts used for holding shares and other securities
- Mutual fund investments, both online and offline
- Insurance policies, including life and general insurance
Nominee vs Legal Heir
A nominee acts only as a custodian of assets after the account holder’s death. Their role is to receive the assets and ensure they are passed on to the rightful successors. In contrast, legal heirs are the actual beneficiaries who inherit the assets, as decided by a valid will or succession laws.
For example, if X names Y as a nominee and Z is the legal heir, then after X’s death, Y will receive the assets but must transfer them to Z. The nominee does not gain ownership rights over the assets.
Role of a Nominee
A nominee is appointed mainly to simplify and speed up the transfer process. In the case of bank deposits, banks are required to settle claims within a short time after receiving intimation of death. Banking nominations are governed by specific laws, and only individuals can be nominees.
For investments and insurance, the proceeds are paid to the nominee, which releases the institution from further liability. The nominee’s duty is to ensure that the assets ultimately reach the legal heirs.
Rights of a Legal Heir
Legal heirs have full ownership rights over the assets they inherit. They become the lawful owners and can approach the courts if there is any misuse or dispute. Legal heirs can also sell or rent inherited property and are responsible for related taxes, dues, and legal formalities, such as obtaining a succession certificate when required.
What Is a Will?
A will is a legal document through which a person clearly states how their assets should be distributed after their death. In India, wills are governed by the Indian Succession Act, 1925. The law allows an individual to decide who will receive their property, money, and other assets, helping avoid confusion and disputes among family members.
Any person in India who is above 18 years of age and of sound mind can make a will. There is no restriction based on income, asset size, or profession. A will can be made at any stage of life and can also be changed or updated whenever circumstances change.
A will can cover almost all personal assets, including:
- Bank deposits and cash
- Shares, mutual funds, and other investments
- Real estate and property
- Jewellery and valuable personal belongings
- Business interests and ownership stakes
Types of Wills in India
In India, wills can take different forms depending on who creates them, the circumstances, and the intended purpose. Understanding the types helps ensure your assets are distributed according to your wishes.
Unprivileged Will: An unprivileged will is made by any person who is not a soldier on duty, airman, mariner, or engaged in actual warfare. To be valid, it must be signed by the person making it or by someone else at their direction and in their presence. At least two witnesses must attest to the will, having seen the signature or mark of the testator or the person signing on their behalf.
Privileged Will: Privileged wills apply to soldiers, airmen, and mariners. These can be written or verbal, and the legal requirements are relaxed to allow quick execution. A privileged will is valid if written fully by the testator, partly by someone else under the testator’s direction, or even verbally declared. Half-completed wills can also be valid if there is proof that non-execution was not an abandonment of intention.
Mutual Will: Mutual wills involve two people, typically spouses, who grant each other reciprocal benefits during their lifetimes.
Conditional Will: These wills take effect only if certain conditions are met. If the specified contingency does not occur, the will does not operate.
Sham Will: A sham will is made without the true intention of the testator. Wills created under fraud, coercion, or lack of free consent are invalid.
Joint Will: A joint will is created by two or more people agreeing to make a single will, usually effective after the death of all testators. It can be revoked during the lifetime of any testator.
Duplicate Will: A duplicate will is created for safekeeping, often kept with a bank or trustee. Destroying the original revokes the duplicate.
Holograph Will: A holograph will is entirely handwritten by the testator and is valid if it clearly demonstrates the person’s intent.
Concurrent Will: Concurrent wills are multiple wills created by the same person for convenience, such as separating instructions for movable and immovable property.
Each type of will serves a specific purpose, and choosing the right one depends on your circumstances, occupation, and the assets you want to distribute.
What Is a Trust?
A trust is a legal arrangement where one person transfers assets to another person or entity to hold and manage them for the benefit of someone else. In India, trusts are governed by the Indian Trusts Act, 1882. The main purpose of a trust is to protect assets, ensure orderly management, and control how and when wealth is passed on to beneficiaries.
A trust involves three key parties. The settlor is the person who creates the trust and transfers assets into it. The trustee is responsible for managing the trust assets as per the terms laid down in the trust deed. The beneficiary is the person or group for whose benefit the trust is created and who ultimately receives the benefits from the trust.
Types of Trusts in India
Trusts in India can be structured in different ways depending on the objective of wealth planning.
Private Trust: It is created for the benefit of specific individuals or families. It is commonly used for estate planning, succession planning, and protecting family wealth.
Public Trust: It is created for charitable or religious purposes, such as education, healthcare, or social welfare. These trusts are governed by additional state laws and are not meant for personal wealth transfer.
When Do Trusts Make Sense?
Trusts are not necessary for everyone, but they become highly effective in certain situations.
They are useful for HNI families where asset complexity is high and long-term control over wealth distribution is required. Trusts are also ideal when there are minor beneficiaries, as they allow assets to be managed responsibly until the child reaches adulthood.
For families with special needs dependents, trusts help ensure long-term financial security without disrupting government benefits. Trusts also play a crucial role in business succession planning, allowing smooth transfer of ownership and management while avoiding family disputes.
When structured correctly, trusts provide flexibility, control, and strong protection, making them a valuable wealth protection tool in India.
Wrapping Up
Nomination, wills, and trusts work together to provide comprehensive wealth protection. Nomination ensures quick receipt of assets, a will defines legal ownership, and trusts offer structured control for long-term management. Planning early and reviewing documents regularly helps prevent disputes, delays, and unintended transfers.
True wealth protection is about clarity, control, and continuity, not just asset size. Investors should use these tools in conjunction to create a clear, well-aligned succession plan that secures their family’s financial future.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
