New Delhi, Oct. 12 -- When you open a bank fixed deposit, invest in mutual funds or put money in small savings schemes like the Public Provident Fund (PPF), you are typically asked to nominate a person who can receive the funds in the event of your death.

This helps banks and financial institutions identify whom to approach for settling the investment. However, many investors assume that nominating someone automatically makes them the legal owner of the money after their death.

A nominee only acts as a custodian of the assets, which may include mutual funds, PPF corpus or fixed deposit money, until they are transferred to the rightful legal heirs. Such a person has no ownership rights over these assets unless they are also a legal heir,...