Many people, while investing in schemes, don't think of nominees as important people to mention and overlook. However, there is an important need to assign a nominee, as it would lead to fewer difficulties while claiming the investment matured amount or any will. It is important to appoint legal heirs and make a will to ensure the assets and funds go to the rightful heirs. When talking about nominee vs legal heir for fixed deposits, people are often confused about what a nominee is, what an heir is, and what happens if they don't appoint one. What difficulties would the rightful heirs will have to face in case no nominee is appointed?
This guide will provide details on nominee vs legal heir for fixed deposits:
Who is the Nominee?
In technical terms, a nominee's role is akin to a guardian's. They bear the responsibility of ensuring that the legal heirs of the depositor rightfully receive the funds from a fixed deposit. It's worth noting that while a nominee and a legal heir can sometimes be the same person, the designation as a nominee doesn't grant them actual ownership of the funds.
Understanding Legal Heirs
These are individuals who, as per a will or laws, are entitled to inherit the investments and possessions of a deceased individual. It is a legally binding document that conveys a property owner's desires regarding the distribution of their assets after their passing.
Under Hindu succession law, when a man passes away without leaving a will, his property is inherited by Class I heirs. In other cases, Class II heirs inherit the will.
Nominee vs Legal Heir For Fixed Deposits
When considering nominees vs legal heirs for fixed deposits, the nominees are important when making investments and fixed deposits. A nominee ensures a smooth transfer of the investor's funds to the rightful heirs.
Without a designated nominee, legal heirs face difficulties and must prove their relationship and obtain a death certificate to access the funds. However, when a nominee is in place, these difficulties are eliminated, and the nominee becomes the facilitator of transferring the money to the legal heirs.
On the other hand, legal heirs are individuals designated by the account holder to inherit their investments, properties, and assets through a will. By specifying the legal heirs, the fixed deposit proceeds and other investments can be distributed to them via the nominee if one is appointed.
Without a clear will or nominee, legal heirs face the difficulties mentioned above. To simplify matters and prevent complications for the legal heirs, investors or asset owners should prepare a will that clearly outlines the distribution of their assets after their passing.
Factors To Consider While Appointing a Nominee
Appointing a nominee for your investments is a significant decision to ensure your assets are well-protected. Let's explore these considerations:
- Select Your Nominee Thoughtfully
When appointing a nominee, you have the legal freedom to choose anyone you trust. However, it's wise to pick close family members or legal heirs as your nominees. It's even better if your nominee and legal heir are the same person to prevent potential disputes over inheritance rights.
There is no fixed timeframe for legal heirs to claim the assets in India. If the nominee and legal heir are the same, difficulties occur if other legal heirs don't assert their share. In these cases, the nominee might assume the legal heir has renounced their rights. The solution of the reasonable timeframe for such actions is usually handled on a case-by-case basis by the high court. Hence, it's important to appoint a nominee you trust with your investments.
- Double-Check the Details
Accuracy is important when nominating someone for your investments. Ensure there are no spelling errors in the nominee's details. If there are multiple nominees, specify the percentage share of each.
If your nominee is underage, it's necessary to include the name of an older family member as their guardian.
- Keep It Updated
Nomination details are often provided when acquiring the asset, but these details can fade into the background over time, so revisit and update your nomination details periodically.
Regular updates are essential to prevent disputes and ensure your nominee's information remains accurate. If your nominee's name or other details change, it's crucial to make the necessary updates.
It's important to note that institutions and banks transfer assets to the nominee without requiring a succession certificate. During this period, your family won't have immediate access to the investments. Therefore, keeping your nomination details current is a vital step.
Importance of Adding Legal Heir For Your Fixed Deposits
In your will, an investor must specify who the legal heirs are for all their investments, properties, and assets. When the account holder provides the legal heir details, the returns from the fixed assets will be directed to them through the Nominee, if applicable.
On the contrary, without a designated nominee, legal heirs would be compelled to furnish various documents to prove the relation with the deceased. To avoid these cumbersome procedures for the legal heirs, it is advisable to arrange for the distribution of assets following the investor's demise by crafting a will.
Non-Designation of Nominee or Legal Heir Outcome
In nominee vs legal heir for fixed deposits, when an individual doesn't specify a nominee, the bank or institution will make efforts to locate the legal heirs of the investor. If they cannot identify the legal heirs, the funds are held in a segregated account, awaiting a rightful claimant.
Anyone attempting to claim the funds must provide evidence of their relationship with the deceased investor or account holder. This typically involves submitting a legal heir certificate or a succession certificate.
The absence of a nominee for their investments creates significant inconveniences, not only for the bank but also for the legal heirs involved.
Conclusion
When discussing nominee vs legal heir for fixed deposits, you should know certain details to avoid later difficulties. You should know about the roles of both legal heirs and nominees before investing and creating a will. Appointing a Nominee whom you trust is most important, and regularly updating the details of your Nominee is a must. Decide and plan things with a sound mind to avoid any future disputes and difficulties for your loved ones.