The role of an FD nominee is not only about taking care of the account; it’s about upholding the account holder’s wishes. They ensure that the funds are utilised according to the intentions of the account holder. It’s important to understand that a nominee doesn’t claim ownership of the funds; they are more like guardians, entrusted with the task of making sure the funds reach the right hands by following the FD nominee rules.
What is the Meaning of Legal Heir?
A legal heir is someone who has the rightful claim to inherit the assets of a person who has passed away, as defined by the law. For an FD, a legal heir is someone who is entitled to receive the funds after the account holder’s demise. If a person passes without a will, their funds will be distributed according to the law of succession.
In India, laws such as the Hindu Succession Act, of 1956, the Muslim Personal Law, and the Indian Succession Act, of 1925, define the framework for determining legal heirs. These laws categorise heirs into different classes, determining their eligibility based on their relationship to the deceased, for example, spouse, children and siblings.
Nominee vs Legal Heir: Fixed Deposit
Given below is a clear comparison between the roles of an FD nominee and a legal heir in managing FD funds after the account holder’s passing.
|Appointed custodian of FD funds by the account holder
|Individuals entitled by law to FD returns
|Does not acquire ownership of the assets
|Ownership of the FD account lies with the legal heir
|Safeguarding funds until claimed
|Authority to claim and receive funds
|Receives amount upon maturity
|Receives sum after account holder’s passing
|Relationship to Owner
|Appointed by the account holder
|Inherits entitlement based on legal status
|Not automatically a legal heir
|Possesses ownership and entitlement
What Happens When No Nominee or Legal Heir is Appointed?
When an individual pass away without designating a nominee or legal heir for their FD, it triggers a series of potential actions by the bank:
- If the account holder hasn’t left any instructions or will regarding their FD in the event of their death, banks often try to reach out to close relatives of the deceased.
- The bank might continue to manage the investment or put the FD in a suspense account for a defined period until someone steps forward to claim the funds.
- After the specified duration (usually 10 years), if no legal heirs come forward, the FD is transferred to the government.
These procedures can vary depending on the bank FD nominee policy and procedures. To avoid complications in such scenarios, it’s advisable to designate a nominee for your FD and create a clear and updated will specifying asset distribution to legal heirs and beneficiaries.
How to Claim Fixed Deposit After Death of Account Holder?
When a fixed deposit account holder passes away, the FD nominee and legal heir(s) need to understand how to claim the deposited amount and the interest accumulated.
For Single Account Holder:
The withdrawal process for FD amounts varies depending on the type of account. Additionally, nominee/legal heirs can also seek premature withdrawal.
- Without Nomination: Legal heirs submit succession certificate/will, and account holder’s death certificate to access funds.
- With Nomination: Nominee submits account holder’s death certificate, proof of identity for withdrawal.
For Joint Accounts Holder:
When a joint bank account passes away, the FD value can be claimed using different ways based on various scenarios.
- Latter or Survivor: If the first account holder passes away, the second becomes prime. If both die, the FD nominee receives the principal and interest. Without a nominee, legal heirs can access funds.
- Former or Survivor: After the first holder’s demise, the second can withdraw. If both account holders pass away, the nominee can withdraw. In the absence of a nominee, legal heirs can withdraw the available FD amount.
- Anyone or Survivor: On the account of one account holder’s unfortunate demise, the survivor(s) receive the balance and interest. If all account holders pass away, the nominee will receive the funds. If some account holders pass away and no nominees are appointed, the living depositors and legal heirs will receive the funds.
- Either or Survivor: If one account holder passes away, the balance is disbursed to the living account holders. If all account holders pass away, the FD nominee receives the funds. In the absence of a nominee, the legal heirs will be the recipients.
Premature withdrawal requires consent from survivors and legal heirs if mandated during account opening. Nominee(s)/legal heirs can claim the FD value if none of the joint holders are alive.
In the world of fixed deposits, understanding the FD nominee rules and the role of legal heirs is crucial for a seamless transition of assets. Nominating a trusted individual, safeguards your financial legacy, while legal heirs play a pivotal role in ensuring rightful access. By designating nominees and understanding the FD nominee rules, you ensure a smooth path for your loved ones to claim your hard-earned savings when the time comes.