regarding nomination

Scientist/Engineer

I am a very old lonely person.  I have only one son. He is well employed in Government service. His wife is a doctor who is also in Government service with good salary. I have 2 grandchildren aged above 25 years and are well-employed. My son is financially taking care of me as a loving son. He has also taken an insurance policy with myself as nominee. If something should happen to my son, God forbid, the insrance money will be paid to me. What should I do?  Should I keep it for my own living expenditure or distribute it to my daughter-in-law and grandchildren?

 
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Executive Director(Retd)

I presume that you must be a septuagenarian or octogenarian.Strictly speaking,the beneficiaries under a life insurance policy must be the Class I legal heirs of the policyholder ( life assured ).But for the sake of easy and quick settlement of claim in the event of unfortunate death of the life assured,provision has been made under Section 39 of Insurance Act 1938 for nominating a near relative to receive the policy monies by giving a valid discharge to the insurance company.Legally the claim amount belongs to all the Class I legal heirs of the company,viz,mother,spouse and children of the deceased policyholder.Under Hindu law of succession,father is not a Class I legal heir.Depending on the circumstances obtaining in your family situation,if besides your son,your daughter-in-law and grand children who are majors are agreeable to  your receiving the policy money in the event of (God forbid) the unfortunate death of the life assured  and enjoy the same during your life time,the nomination can be allowed to subsist.In such a contingency,whatever cash you leave after your life time will be inherited by your daughter-in-law and grandchildren.However, from the financial background of your family,I think there may not be any scope for dispute,but it is always desirable to come to an understanding .Alternatively if your son is able provide an arrangement for a stable income in his absence through  gifting a fixed deposit  to you yielding regular  interest income for your expenses,then he can consider changing the nomination in the insurance policy in favour of your daughter-in-law.This is only my practical suggestion.Having said this,I wish you, your son ,daughter-in-law and your grandchildren a long, happy and healthy life.I am myself 77 years old with my wife staying at Chennail and married daughter  at USA with a 13 year old grand daughter.

 
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Retired employee.

I honestly presume that it can be never Dr.Ramani's issue, and to provocate for more discussions he has posted an imaginary issue.  He is an expert and never needs any guidance on any issue.

 
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Executive Director(Retd)

Whatever may be,I have given my view for the situation put forth by Dr Ramani.I hope some one in such a situation will find my suggestion useful.

 
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Scientist/Engineer

When one takes out a life insurance policy it is a deliberate conscious action. One needs to take out a policy only if there is someone to be looked after by one. He nominates a person, whom he thinks is the person to be provided for in the event of his untimely device. He doesn’t nominate in order to help the insurer to settle the issue.

What Mr. Mahadevan says is what judgment a court will give in this country. I say it is judgment and it is not law as stated in any of the nomination laws. There is no law which says that nominee is not the absolute owner. There is no law which says a nominee is a trustee or an executor. Why!  in the case of Company Law, the law clearly says that the shares should be transferred to the name of nominee to the exclusion of other claimants.  Still judges have invented reasons to say that nominees are not rightful owners.

A bank deposit or an insurance amount would evaporate before the so called rightful owners find out.

Laws are enacted by law makers. They are the original authors of all laws. Courts enforce the laws and give interpretation if there is missing link or a lacuna. But in this country courts have become law makers and the legislators try to follow them. Things are upside down. A typical instance is the recent amendment to the Maharashtra Co-operative Societies Act. For about a hundred years co-operative society flats were being transferred to nominees. Nominees continue to enjoy the property and even convert them to cash when needed. Then there was a Bombay High Court judgment that nominees are not absolute owners.  What did the legislators do? They amended the law to comply with the judgment. Under the amended  law a nominee will be only a “Provisional Member” until they transfer as per will of the deceased member or the succession act to rightful owners. Why should a nominee hold a baby which is not his, pay regularly the Society dues and take the trouble of searching and finding out the so called real owners?    If the deceased member had thought it fit to nominate a person, what harm is there if he is made the real owner? In fact most of those who nominate believe that their nominee will be the ultimate owner. Judgments are not gospels.


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Advocate

My learned friends may kindly peruse the discussions on the subject of "Nomination before marriage in the thread:

http://www.lawyersclubindia.com/forum/details.asp?mod_id=156711&offset=1

 
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Scientist/Engineer

That thread is full of mud slinging and no worthwhile knowledge had been exchanged. Here at least people have mutual respect so far. Let us not vitiate the atmosphere

 
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Executive Director(Retd)

I have given my views from how we have handled the subject of nomination under life insurance policies in Life Insurance Corporation of India.The nomination under Sec 39 of Insurance Act 1938 with latest amendments made in 2015 cannot override Succession Laws in the country.I am of the view that nominee under a life insurance policy holds the policy monies received from the insurer on death of the policyholder in trust to be distributed to all the  Class I legal heirs of the deceased policyholder.Only thing is the liability of the insurer has got discharged with the settlement of the death claim in favour of the nominee.There have been a number of cases where there have been rival claims,especially between wife and mother-in-law, in spite of nominations and wherever the courts issued prohibitory orders,the claims were ultimately settled as per directions of the court orders.If there was no prohibitory order  received by LIC,the claim was settled to the nominee,That does not mean the nominee enjoys absolute  and exclusives beneficial interest in the policy monies.The other legal heirs can still approach the court to get their respective shares in the policy proceeds if there is no amicable settlement among themselves.

in situations where there was no nomination or where nominee had predeceased the life assured,LIC,instead of calling for strict proof of title like Succession Certificate,used to waive the same and instead settle the  death claim in favour of all legal heirs on the basis of an indemnity bond except in very large sum assured cases.

Nomination under a life insurance policy can be cancelled or changed at any time during the currency of the policy at will during is life time.So the nominee cannot take advantage of the negligence of a policyholder in not changing the nomination in favour of wife immediately  after his marriage,to claim exclusive beneficial interest in the  policy death claim.

 
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Scientist/Engineer

Posted by Mr. C. H. Mahadevan

"The nomination under Sec 39 of Insurance Act 1938 with latest amendments made in 2015 cannot override Succession Laws in the country."

Yes I very much agree with Mr. Mahadevan. It is so, in so far as interpretation of law and judgments are concerned. To put it in other words a nomination by a testator does not have the same weightage and authority of a will by the same testator. Why it should be so? No justification can be given. A person who files a nomination mostly firmly believes that the nomination is equal to a will. Whether a will or a nomination the intention of the testator is the basis. The intention is the same in both the cases.  Please see my profile. All just laws should comply with common sense. If it doesn't in any case the law makers should change the law.

In the case of my son he knows this problem. Hence he has made a will also.  But most people are not knowledgeable. They believe that a nomination is enough. Laws and judgments are not gospels.

 
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Executive Director(Retd)

If your son has made a Will bequeathing the moneys payable under the life insurance policies in question to the beneficiaries under the Will,the Will will take precedence over the nomination made.So the nomination will then become invalid and the insurer will settle the death claim when it arises to the executors of the Will on submission of a Probate of the Will.

 
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