A Fixed Deposit (FD) is an investment option that offers capital stability for a predetermined tenure chosen by you. Assigning a nominee in a fixed deposit helps ensure that the deposit proceeds can be claimed smoothly in case of the depositor’s death; however, legal heirs’ rights will prevail as per applicable succession laws.

If the fixed deposit holder passes away during the tenure of the deposit, the FD proceeds are paid to the registered nominee after completing the required formalities. The depositor can nominate any individual, though it is generally advisable to choose a close family member or legal heir. In such cases, the nominee typically receives the amount as a custodian on behalf of the legal heirs, and the final entitlement to the maturity amount is determined as per the will (if any) and applicable succession laws.

What is a Nominee?

A nominee is appointed by the account holder, who will get the fixed deposit amount if anything should happen to the holder. However, they are just caretakers of the funds and not the owners. According to the governing laws in India, the nominee will have the right to access the deposit in case the account owner dies. If the legal heir claims it, the nominee has to hand over all the funds collected from the FD account. In some cases, the nominee will only hold the money as a trustee until they transfer it to the legal heirs of the deceased.

What is a Legal Heir?

A legal heir is a person defined by the account holder in their will as the person who will receive the maturity amount after the account holder's demise. A legal heir is entitled to take ownership of the funds from the nominee.

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

Making a will may seem exhaustive practice that people avoid and think that nomination is enough. But a will always aid to support a legal heir if there is any dispute over the money of a fixed deposit. If a person does not create and undersign a will before dying, their wealth will be divided based on the law of their religion or the government's regulations.

If the account holder has not appointed a legal heir or a nominee, the bank or NBFC will keep re-investing the deposit till someone comes forward to claim it. After a particular period, the amount may be sent to the government. If a person tries to claim the deposit amount, the bank/NBFC will ask them to submit some proof of relation to the deceased owner of the account.

Who Will Receive the FD funds if the Account Holder Has Appointed Both?

The proceeds from a fixed deposit will go to the nominee upon the account owner's death. The nominee will only be responsible for safeguarding the funds till a legal heir claims them. If none of the account holder's relatives wants to claim the money, the nominee gets to keep it.

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

It is the bank's/NBFC's responsibility to ensure that the matured deposit taken care of until it is given to the nominee. If a nominee is assigned, the bank will transfer the funds to them. A legal heir can then claim the money directly from the nominee or the financial institution if no nominee is appointed. There may be times the FD account holder may forget to include any nominee or legal heir. In this case, the bank/NBFC will try to reach family members.

Conclusion

While opening a new FD, you need to remember to appoint a nominee and make a will stating clearly the legal heir. In this way, you can avoid any conflict that may occur after the death of the owner of the fixed deposit account.

To explore fixed deposit options and nomination facilities, you may review the fixed deposit offerings of Shriram Finance and consult for our documentation requirements.

FAQs

Is a legal heir and nominee the same?

No, the nominee acts as a guardian to the fixed deposit after the owner is deceased. The legal heir is entitled to access these funds upon demand if the nominee possesses them.

Can a legal heir claim money from the nominee?

Yes, as per the laws in India, the legal heir may claim the FD maturity amount money from the nominee.

Is a nominee the owner of a fixed deposit?

The nominee is not the account owner but is responsible for keeping the funds protected if the account holder dies.

Who comes under legal heirs?

Legal heirs are determined by a valid will or by applicable succession laws if no will exists.