Nominee vs Legal Heirs for Fixed Deposits

What is Nominee Meaning in Banking?

A nominee is the person you officially name to be the temporary receiver of your bank funds (like an FD or savings account) if something happens to you. Think of them as a trusted custodian. Their main job is to quickly collect the money from the bank without needing lengthy legal paperwork, ensuring the money is accessible right away. However, they are legally responsible for passing those funds on to the true owners (the legal heirs).

What is Legal Heir Meaning in Banking?

Legal heirs are the people who are the rightful owners of your assets according to your Will or the country's inheritance laws. In case of any unforeseen circumstances, the bank is legally required to eventually transfer the ownership of your funds to these heirs. While the nominee gets the money first for speed, the legal heirs have the final right to keep and inherit those funds.

Nominees vs Legal Heirs for Fixed Deposit

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

In some instances wherein the account holder does not leave behind any official document (or will) before their unfortunate demise, their legal heirs can access funds.

• The distribution of their assets, including bank accounts, will be governed by the Laws of Succession and will be passed on to the Legal Heirs.

• The Legal Heirs of the deceased account holder will have to obtain a legal order from a court, such as a transfer order, to establish their entitlement to the assets, including bank accounts.

It is advisable for all to make a will and nominate their beneficiaries for all accounts, including fixed deposit accounts, to ensure a smooth transfer of assets after their demise.

Who is Entitled to Receive Fixed Deposit Funds if Account Holder Has Appointed Both?

If the account holder has appointed a nominee, the bank will transfer the fixed deposit amount to the nominee without requiring a probate order or other legal formalities. The same person is responsible for safeguarding funds until a legal heir claims them. If none of the account holder's relatives wants to claim the money, the nominee gets to keep it.

Role of Bank:

• The bank plays a key role in securing and transferring the fixed deposit amount to the nominee or legal heirs of the deceased account holder as per the terms and conditions.

• It also verifies the identity of the claimants and ensures transfer of the funds with compliance.

Exceptions to the Nominee and Legal Heirs Rule

As per the laws, legal heirs are entitled to own the inheritance, not nominees. However, an exception can arise when dealing with shares. If a person has been named as the nominee for certain shares, the nominee owns those shares until a will is produced that supersedes it.

How to Open a Fixed Deposit Account?

Fixed deposit accounts are attractive investments for those seeking stable and secure returns. The FD interest rates are high compared to other savings accounts.

To open a fixed deposit account, follow these steps:

• Choose a bank or financial institution that offers fixed deposits.

• Decide on the amount you want to deposit and the duration of the deposit.

• Fill out the application form with your personal and account details.

• Submit the form along with the required documents, such as ID proof, address proof, and passport-size photographs.

• Transfer the funds to the fixed deposit account either online or by visiting the bank branch.

• Wait for confirmation from the bank regarding the account opening and deposit details.

Note: The specific requirements and procedures may vary depending on the bank or financial institution. 

In Conclusion

Account holders need to understand the difference between nominees and legal heirs for fixed deposits to make informed decisions. In case of ambiguity, seeking professional legal advice can help ensure that the deposit is distributed as per the account holder's wishes and in compliance with the relevant laws.

FAQs