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Succession Planning

Nomination vs. Assignment

Earlier, we learned the importance of the nomination for different assets. But in succession planning, there is a similar concept called Assignment, which is basically a legal term whereby a person, the assignor, transfers rights or benefits to another, the assignee. Let us now discuss a few differences between nomination and assignment. 


  • In case of a life insurance policy making nominees is restricted to immediate family members such as spouse, parents and children as the ultimate beneficiary so that the insurance money can go to the intended recipient. 
  • Nomination is a right given to the policyholder to appoint person(s) to receive the money in case of the demise of the holder. One can appoint multiple individuals as nominees and can also specify their shares of the policy proceeds in percentage terms.
  • In case of an assignment of a life insurance policy, the nomination automatically stands cancelled.
  • An assignment of the policy automatically transfers the right of the policyholder (assignor) and his/her nominee to receive the sum assured on death of the policyholder or on maturity of the policy to the assignee. 
  • Assignment must be in writing and a notice to that effect must be given to the insurer. But the catch is that once the assignment has been done, it cannot be revoked. After assignment, the assignee will be eligible to receive the proceeds from the policy, and not you, even if you survive the tenure, (unlike nomination).
  • The assignment of life insurance policies can also be used as collateral while taking a loan. If an insurance policy is assigned to the lending bank and the policy holder expires during the tenure, the insurance company shall pay the outstanding loan amount to the bank and the remainder (if any) will be paid to the legal heirs of the policy holder. 

In this case, if the holder survives the tenure, the bank will reassign the policy back to him/her.


Next, let us learn some other concepts that are heavily used in succession planning:


Joint Holding Account

  • When you open a bank account or any other investment account then you are given a choice to hold it in either ‘Single’ mode or ‘either or Survivor mode’ – this is the joint mode of holding the investments or bank account.
  • It is better to hold joint accounts with your spouse. Such joint accounts hold signatures of either holder valid to carry out a transaction. 
    Having a joint account with your spouse and nominating your child is a good way to ensure easy transfer of your financial assets as the surviving members get seamless access. 
  • If both account holders die, the nomination helps the child to get immediate possession of funds.

Power of Attorney (PoA)

  • It is a legal authority given by one person (donor) to another (donee) to act on his behalf. 
  • A PoA can be general, which enables the donee to carry out all deals on behalf of the donor, while a specific PoA is given for a particular purpose. 
  • A PoA can be revocable or irrevocable. 
  • A PoA can be misused if given to an unsuitable person. Moreover, it is not a substitute for a will as it ceases to be valid immediately on the donor's demise.

Transfer of property & Mutation

  • Transfer of property refers to the process of shifting the title of the property from one person to another. 
  • Both movable and immovable properties can be transferred.
  • Property can be transferred through various means like sale or under a Will.
  • Once the transfer is done, the new owners must do mutation which simply means getting the immovable property registered in his/her name in the records of the municipal corporation or land revenue department.

Life insurance

  • Life insurance serves a very good tool for estate planning apart from providing risk cover. 
  • This is because of the reason that one has to pay lesser premiums in total when compared to the sum assured the beneficiaries can receive.
  • Generally in the case of insurance the earlier one starts the more benefits one will get in terms of lesser premiums.
  • Term insurance and whole life insurance specially serve as good estate planning tools for the simple rule that they offer protection for the whole family apart from building an estate.

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Units 6/25