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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tools for Estate Planning

Caselet: Mr. Rao, aged 70, has three children. He holds a joint bank account with his wife as 'either or survivor' with his wife as first holder, a demat account with his son nominated, and has a will leaving all his shares to his daughter. Mr. Rao dies, and the will is valid. His son claims the shares on the strength of the nomination. Which is the correct position as generally taught for the legal effect of nomination?

The son as nominee is only entitled to receive the shares from the depository. The beneficial ownership passes to the daughter under the valid will, so the son holds them on behalf of the legal heirs or legatee and does not become absolute owner.

  1. AThe nominee receives the shares as a trustee and the legatee under the valid will is the one entitled to the beneficial ownershipCorrect
  2. BThe nominee becomes absolute owner and the will is overridden
  3. CThe shares must be split equally among all three children irrespective of the will
  4. DThe shares pass to the government because two instruments conflict

Explanation

Per the position taught in the chapter, a nominee is entitled to receive the asset from the institution, but the beneficial title passes under the will or succession law. The son must therefore hold or transfer the shares for the daughter, who is the legatee. Nomination does not override a valid will.

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