Everything About Nominees In Bank Accounts : Who Gets Your Money After You’re Gone?

When you are opening an account at a financial institution, generally speaking, you may be asked to select a nominated survivor. This simple selection can help to simplify the process for your loved ones after you are deceased; however, it does not affect how inheritance laws operate in India. This article will help to clarify how nominations work in India, their historical significance, how banks view nominations today, and what families can do to quickly claim amounts due from the nominations.

What Is A Nominee In A Bank Account?

A nominee(s) in an account is the person(s)/entity(ies) that you designate to receive the balance of your account or deposit proceeds as quickly as possible upon your death. Nominee(s) are responsible for acting as custodians of the funds or acting on behalf of the legal heirs of the deceased account holders and receiving funds from the financial institution to hold for the legal heirs until the legal heirs have claimed them. Nominations expedite access to funds and provide relief for dependents of deceased individuals, but do not alter who owns the accounts or determine how the laws of inheritance will determine who receives the accounts of deceased individuals.

Who Can Be A Nominee?

There are several categories of individuals who are allowed to be named as nominees, and there are some key practical considerations to know regarding each category of nominee and the way various banks will treat those designations:

• Any adult individual (spouse, child, parent, relative or friend) can be named as a nominee.

• Minors may also be named as nominees. If you choose to name a minor, the bank will either pay the proceeds directly to a designated guardian or establish a separate account for holding the proceeds until the minor reaches age 18.

• Nominees who live outside of India (non-resident Indians or NRIs) may be named, but some banks may require special clearance from the Reserve Bank of India or their own institution-specific requirements before permitting the transfer of funds abroad.

• Certain banking products also allow corporations or trusts to act as nominees; however, there may be limitations placed on this by the specific institution mailing the specific instrument you are considering.

How Does Nomination Work?

The process for nominating a nominee on banking products (e.g., checking, savings accounts, bank deposits, bank lockers, financial instruments) generally works as follows:

1) At the Opening of an Account -

At the time you open your account, ask your bank for a nomination option. Write down the nominee's name, relationship, address and if the nominee is a minor, the name of the minor's guardian. Your bank will record this information in your account file.

2) Adding/Changing the Nominee -

If you wish to add/change your nominee at a later date, go to your bank branch and request to change your nomination. Also, if you have access to the internet, you can do this via net banking or using your bank's mobile app, depending on your bank. Bring your government-issued ID and the completed nomination/change form to your bank branch.

3) Minor Nominees -

If you have named a minor as your nominee, you will also need to provide proof of guardianship and verification of the minor's age. Your bank will pay the funds to the guardian upon your death, or deposit the funds into a “minor’s account” until the minor reaches the age of majority.

4) Lockers and Other Safe Deposit Boxes -

Your bank allows you to name a nominee for a locker or safe deposit box. However, you need to verify your bank's procedures before naming a nominee.

What If There Is No Nominee?

When there is no nominee, the process of claiming funds from a bank will take longer than when there is a nominee. A lot of time can be spent attempting to establish who the rightful claimants to the funds are. Generally, banks require a succession certificate, a legal heir certificate, or a court order to settle the claim. Due to the level of hardship caused by these circumstances, the Reserve Bank of India (RBI) has encouraged banks to promote nominations to minimise the difficulties faced by families in these situations. This is one of the reasons there are large amounts of unclaimed deposits held by banks, despite government attempts to address this issue.