Nominee Can Claim Funds in Deceased Depositor’s Bank Account, Subject to Succession Laws
The relationship between a nominee, the legal heirs, and the funds in a deceased depositor’s bank account is a common source of confusion. While the nominee plays an important role in ensuring that funds are accessible after the depositor’s death, it is vital to understand the nominee’s legal position and how succession laws govern the ownership of the funds. This article discusses the legal framework, the nominee’s responsibilities, and key considerations, along with an extensive FAQ section.
Understanding the Role of a Nominee
A nominee is a person designated by the account holder to claim the funds in the account upon the depositor’s demise. This nomination is governed under Section 45ZA of the Banking Regulation Act, 1949, along with relevant provisions of the Banking Companies (Nomination) Rules, 1985.
Key Features of a Nominee’s Role:
- Simplification of Claim Process:
The purpose of a nomination is to ensure that the funds are transferred without undue delay. By nominating an individual, the depositor authorizes the bank to release the funds directly to the nominee upon submission of required documents, such as the death certificate. - Limited Rights of a Nominee:
A nominee does not become the absolute owner of the funds. Instead, they act as a custodian or trustee for the legal heirs or beneficiaries mentioned in the deceased’s will or as determined by succession laws. - Legal Authority to Claim Funds:
Banks are obligated to release the funds to the nominee irrespective of any disputes among legal heirs. However, this does not affect the heirs’ legal rights to the money.
Real-Life Example:
Suppose a depositor nominates their friend as a nominee. After the depositor’s death, the nominee can withdraw the money, but the legal heirs (e.g., the spouse or children) can demand the amount if they are entitled to it under succession laws.
Legal Ownership of the Funds
The actual ownership of the funds is determined by the personal succession laws applicable to the deceased, which vary depending on their religion and whether they left a will.
Key Legal Scenarios:
- If a Valid Will Exists:
- The funds are distributed as per the instructions in the will.
- The nominee is required to hand over the money to the beneficiaries mentioned in the will.
- If No Will Exists (Intestate Succession):
- The funds are distributed among the legal heirs as per the respective personal laws, such as the Hindu Succession Act, 1956, or the Indian Succession Act, 1925.
- Muslim Personal Law:
- Under Sharia principles, specific shares are allocated to heirs such as the spouse, children, and parents.
Nominee vs. Legal Heirs
The rights of the nominee and the legal heirs are distinct. The nominee has no inherent right to retain the funds unless they are also a legal heir. The Supreme Court of India has consistently upheld this principle.
Case Law:
In Sarbati Devi v. Usha Devi (1984), the Supreme Court clarified that the nominee is merely a custodian and the funds must be distributed as per the succession laws.
Process for the Nominee to Claim Funds
The nominee must follow these steps to claim the funds:
- Informing the Bank:
Notify the bank about the account holder’s demise and provide the required documents. - Submitting Documents:
Submit the death certificate, proof of identity, and the bank’s prescribed claim form. - Verification by the Bank:
The bank verifies the nominee’s credentials and processes the request. - Funds Release:
Upon verification, the funds are released to the nominee.
Implications for Legal Heirs
Legal heirs have the right to claim the funds if they can prove their entitlement under succession laws. Disputes may arise if:
- The nominee refuses to transfer the funds.
- Multiple legal heirs lay claim to the same account.
In such cases, legal remedies such as obtaining a succession certificate or filing a suit in court may be necessary.
Precautions for Account Holders
- Update Nominations Regularly:
Ensure that the nominee’s details are up to date to avoid complications. - Communicate Intentions Clearly:
Inform family members about nominations and your intentions for fund distribution. - Make a Will:
Draft a valid will to minimize disputes among heirs.
FAQs
Q1. Who can be nominated in a bank account?
Anyone, including a family member, friend, or relative, can be nominated. There is no restriction on who can be a nominee.
Q2. What happens if there is no nominee for the account?
If there is no nominee, the legal heirs must produce a succession certificate, letter of administration, or probate of the will to claim the funds.
Q3. Can a nominee and legal heir be the same person?
Yes, a nominee can also be a legal heir. In such cases, the nominee can retain the funds as both the trustee and rightful owner.
Q4. What legal recourse do heirs have if a nominee refuses to transfer funds?
Legal heirs can approach the court to assert their rights and demand the funds as per succession laws. A succession certificate or a court order may be required.
Q5. How can legal heirs claim funds if a will exists?
If a will exists, heirs must present the probate of the will to claim their share of the funds from the nominee.
Q6. Are funds in joint accounts treated differently?
For joint accounts, the surviving account holder usually has priority over the nominee unless otherwise specified in the account agreement.
Q7. Can there be multiple nominees for one account?
Some banks allow multiple nominees for a single account, with the funds being divided in the proportion specified by the account holder.
Q8. What documents are required for heirs to claim funds in the absence of a nominee?
Legal heirs need to provide:
- Death certificate
- Proof of relationship with the deceased
- Succession certificate or letter of administration (if required)
Q9. Is the bank responsible for disputes between nominees and legal heirs?
No, the bank’s responsibility ends with releasing funds to the nominee. Disputes between the nominee and heirs must be resolved through legal channels.
Q10. Can a nominee refuse to distribute funds to legal heirs?
No, the nominee has no right to retain the funds if they are not a legal heir. They can be compelled by law to distribute the funds to the rightful heirs.
By understanding the nominee’s role and the applicable succession laws, depositors can plan better to ensure that their financial assets are distributed as intended, while nominees and heirs can avoid unnecessary legal conflicts.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Advocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304