Personal Finance: Nominating live-in partner for financial products
Even as banks and investment companies have revamped financial products to suit the needs of millennials in our digital age, the restrictions on whether they can nominate a live-in partner, whether same sex or opposite sex, remains a gray area.
A nominee has the right to access the account holder’s bank accounts and is entitled to the money deposited in the savings accounts, deposits (both fixed and recurring) and bank lockers (even while the account holder is alive). All banks allow the account holder’s parents, spouse, children or siblings to be nominees, but only a handful permit live-in partners to be nominees.
Praveen Bhatt, EVP and head, retail liabilities and direct banking channel, Axis Bank said, “Axis Bank does not restrict any relationship to be eligible for being a nominee in its individual liability accounts, i.e., current accounts, savings accounts, term deposits, etc. Live-in-partner can be a nominee in such accounts.”
However, this is more exception than norm.
Banks insist on granting joint home loans to married couples or blood relatives. Live-in partners do not hold much ground while applying for loans.
Besides parents, spouse, and children, some insurance companies also allow their clients to choose cousins and siblings as nominees. However, live-in partners cannot be nominated in life insurance policies.
Adhil Shetty, CEO, BankBazaar, an online marketplace for financial products and check the credit score explained why this is so. “In case a live-in partner is made a nominee, there is no way the insurance company can confirm the relationship between the insurer and the nominee, so there is no way of assigning a beneficial nominee to the policy. This leaves the field wide open for legal disputes between the nominee and the legal heirs especially if the policyholder dies intestate. So, to avoid such complications, the insurers prefer not to have live-in partners as nominees.”
Let us first talk about corporate health insurance that employers extend to their employees. Also called group mediclaim policies, these plans are extended to protect both the employees and their families keeping in mind the rising costs of medical expenses. Many IT and financial services companies allow their employees to include their live-in partners to avail health insurance benefits.
Family floater policies cover legally recognised relationships. Though live-in relationships are not deemed illegal, no health policy covers live-in relationships thus necessitating partners to go for individual health plans.
Live-in partners can be made nominees to mutual fund schemes subject to the submission of certain documents.
“A live-in couple needs to provide proof of cohabitation and submit a declaration of relationship for making the partner a nominee for the financial product. The same may apply to LGBTQ persons as well, but they can’t provide proof of marriage as same-sex marriages are not legal in our country. There always is a risk of biological family members challenging the rights of the nominee after the demise of the person (the will must make it clear that the nominee is the beneficiary). In the absence of clear rules protecting beneficial nominee rights, same sex partners may choose to enter a business relationship and hold joint accounts legally. Specialized professional advice is recommended,” said Raj Khosla, founder and managing director, MyMoneyMantra.
Considering there is no formal statute regarding the financial rights of live-in couples, there is a need to have a law in place that can ensure nomination rights to live-in couples like legally married couples.
Personal Finance is a weekly feature that aims to provide our readers pertinent and helpful financial information.