We insure our lives so that our families don’t have to struggle after our death. But do we adopt the same logic when it comes to our fixed deposit investments, bank accounts or even lockers?
Absence of clarity on who is entitled to the same causes unnecessary hassles to our near and dear ones after our death. This can be overcome by availing the ‘nomination’ facility provided by banks.
The RBI mandates banks to generally insist on a nomination when you open an account. But banks can still go ahead and open accounts even if you don’t want a nomination, as long as you provide a letter stating the fact. Still, if you have bypassed making a nomination when you opened the account, you can get it done with your banker anytime.
The Banking Companies (Nomination) Rules provide for nomination for deposit accounts (savings and term deposits), articles kept in safe custody and for contents of safety lockers.
The nomination facilities can be availed for joint deposit accounts/jointly held lockers too. Forms for registration, cancellation and variation of the nominations for the same are available at your bank.
These forms are pretty simple, requiring you to mention the nature of deposit/locker, the deposit/locker number, the name, address and age of the nominee and their relationship with you, if any, along with your signature. Once you fill up the form and submit it to the bank, remember to ask for an acknowledgement.
This may particularly be useful where you have cancelled the original nomination or changed the original nominee in case of a dispute regarding whom it is entitled to arises at a later date. Banks are also required to incorporate the clause “Nomination Registered” in the passbook, statement of accounts or deposit receipts. The name of the nominee can also be included if you so desire.
WHO CAN BE NOMINEES?
While the nomination facility is available for individuals and sole proprietary concerns, nominations can be made only in favour of individuals. An association, trust, society, or any other organisation or any-office bearer of such institutions, in their official capacity, cannot be a nominee.
But the law allows minors to be nominees. In this case, you have to additionally provide the date of birth of the minor in the nomination form and appoint a third person to receive the deposit/contents of locker on behalf of the nominee in the event of death during the minority of the nominee. There cannot be more than one nominee in respect of a joint deposit account whereas for lockers held in joint names, up to two nominees can be appointed.
SETTLEMENT ON DEATH
For deposit accounts held jointly, the nominee will receive the amount only if all joint holders die.
So what happens when only one of the joint holders dies? If it is an account with a ‘survivorship’ clause (i.e. either or survivor, former/latter or survivor) the amount will go to the survivor. If not, it will jointly go to the other holder(s) who is alive and the legal heir of the deceased holder.
For term deposits, while they can be allowed to mature even if the original holder(s) die, banks also permit premature withdrawal by the nominee or the survivor along with the legal heir(s). In this case, no penal interest is charged.
As for lockers, in case of a locker operated by self or jointly, the nominee will be given access once the holder/all the joint holders die. This is similar to the rule for deposit accounts. However, in case the locker is operated jointly and only one of the joint holders die, the surviving holder along with the nominee(s) will be given access to the locker. There is no concept of the survivor alone or the survivor along with the legal heir of the deceased operating the locker like the one available for deposit accounts. Banks are expected to settle the claims in respect of deceased depositors and release payments to survivor(s)/nominee(s) within a period of 15 days from the date of receipt of claim.
Nomination rules appear clear cut at the outset. Trouble, however, arises when nominees and legal heirs differ. So here, the bank will follow the nomination mandate, after which its responsibilities are considered to end. Legal heirs can lodge a claim for the money directly against the nominee only, and not against the bank. Hence, it isn’t necessary that once nominees receive money, it will remain within their confines only.