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Understanding Fixed Deposits, Nominees, and Legal Heirs: What Happens to Your Money

Updated: Apr 30

Author: Natasha Rei 

Publication date: 06.10.2023

Understanding nominees and legal heirs

Fixed Deposits (FDs) are a popular choice for secure savings, offering predetermined tenures and guaranteed returns. To safeguard your investment, designating a nominee is a wise move. Nominees play a vital role, acting as caretakers in case the unexpected occurs. But what happens when there's no nominee or when legal heirs enter the picture? Let's delve into the world of FDs, nominees, and legal heirs to understand the complex world of financial inheritances.

Nominees in Banking: A Helping Hand

A nominee in banking is someone chosen to act on your behalf in case you can't manage your account. This might happen either due to unforeseen circumstances or in the event of your passing. They're authorized to access and oversee your account, ensuring that your wishes are carried out concerning your finances. This concept is pivotal for both account holders and their nominees, assuring that financial assets are handled appropriately during unexpected situations.

Legal Heirs in Banking: Inheriting the Legacy

Legal heirs, on the other hand, are individuals entitled to inherit the assets and liabilities of a deceased account holder under the laws of succession. These individuals have the legal right to claim and receive the assets and liabilities left behind by the account holder. When an account holder passes away, the bank must transfer the ownership of the account to these rightful/legal heirs. However, this must be guided by the succession laws of the relevant jurisdiction.

The Importance of Making a Will

While nominating someone is vital, creating a will can be equally crucial. A will ensures that there's a clear plan for your wealth after your passing and can help prevent disputes over your FD money. If an individual hasn't drafted and signed a will before their demise, their wealth will be divided according to either religious laws or government regulations. This depends on the jurisdiction.

What Happens if the Account Owner Has Not Made a Will?

If an account holder hasn't appointed a legal heir or a nominee, the bank or NBFC will continuously reinvest the deposit until a legitimate claimant comes forward. After a certain period, unclaimed funds may be transferred to the government. Should someone attempt to claim the fixed deposit amount after death, the financial institution will typically request proof of their relationship to the deceased account holder.

Who Will Receive the Fixed Deposit Funds if the Account Holder Has Appointed Both?

If an account holder has designated a nominee, the bank will transfer the FD amount to that nominee without the need for probate orders or legal formalities. The same person becomes responsible for safeguarding the funds until a legal heir makes a rightful claim. In cases where none of the account holder's relatives steps forward to claim the money, the nominee becomes the beneficiary.

What Role does the Bank/NBC play in this process?

The responsibility of securing the matured deposit rests with the bank or NBFC. If a nominee has been assigned, the bank will transfer the funds to them. Subsequently, a legal heir can claim the money directly from the nominee or the financial institution if no nominee exists. In situations where the FD account holder forgets to name either a nominee or a legal heir, the bank or NBFC typically attempts to reach out to family members.

Exceptions to the Nominee and Legal Heirs Rule

While legal heirs typically have the right to inherit, there's an exception concerning shares. If an individual has been named the nominee for specific shares, they legally own those shares until will surfaces that supersede this designation.

Final Thoughts

Understanding the roles of nominees and legal heirs in the context of Fixed Deposits is vital for account holders and their beneficiaries. In fact, it ensures that your hard-earned money is handled according to your wishes, even when you're no longer around to manage it yourself. Whether through nominees, legal heirs, or the legal framework, the aim is to safeguard your financial legacy.


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