Nominee vs Legal Heir: Who Inherits Fixed Deposit Maturity Amount?

  • Deposit
  • 12 Days ago

Written by - Shriram

A Fixed Deposit (FD) is a unique savings option that helps keep your money secure for your chosen period. Assigning a nominee in a fixed deposit is beneficial as they act as caretakers until the legal heir claims. If no one comes forward to claim the deposit, the bank or Non-Banking Financial Company (NBFC) will re-invest it and let it earn more interest.

A fixed deposit is a popular investment instrument that many choose because of its guaranteed returns. There may be cases in which the owner of an FD meets a sudden demise; in a situation like this, the fixed deposit maturity amount is disbursed to the nominee. The nomination for the account can be any individual close to the depositor, family, friend or close relative. However, the question arises about the role of the legal heir in this scenario and who is the final recipient of the maturity amount. Let's explore the finer details to get an answer to our situation.

What is the Procedure for opening an FD?

A fixed deposit is a savings scheme that gives assured returns, making it one of the most secure investment options. The process of booking an FD is simple and can be done quickly. Adding a nominee before creating a deposit is essential as they will take care of your funds if anything should happen to you.

You can open a Shriram Fixed Deposit online. You must submit a few KYC documents like personal identification, address proof and account details. Apply for a Shriram FD now to get interest rates up to 8.40% per annum, which includes an additional interest of 0.50% per annum for senior citizens .

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/NBFCs responsibility to ensure the security of the matured deposit 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.

Who gets the Maturity Amount - Nominee or Legal Heir?

A legal heir is entitled to the fixed deposit funds if the account owner passes away. Here is a quick comparison chart to help you understand the differences between a nominee and a legal heir.
 
Basis Nominee Legal Heir
Who is it? Nomination is the only way a nominee can claim the FD funds if the deposit owner dies. A legal heir is a person who is entitled to inherit the person's money under the terms of a signed will.
Ownership of the account assets A nominee is just a caretaker and does not own the amount in the fixed deposit. The legal heir is authorised to get ownership of the FD account funds.
Responsibility They are the assigned guardian to the deposit till the legal heir claims the maturity amount. A legal heir can inherit the funds of the deposit after the death of the FD account owner
Absence of a will The nominee retains the role of a caretaker of the FD account and is legally bound to give the money to the account holder's family. Succession laws according to the religion/culture of the fixed deposit account owner will decide the legal heir. As per the laws, sometimes, the structure of succession is predetermined.

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.

Open a new Shriram FD to ensure that you get assured returns and some of the best interest rates in the market. Shriram Fixed Deposit also has unique features like auto-renewal and auto-withdrawal to make your investing journey more convenient.

FAQs

1. 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.

2. 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.

3. Is a nominee the owner of a fixed deposit?
The nominee is not the account owner but is responsible for keeping the funds safe if the account holder dies.

4. Who comes under legal heirs?
A legal heir could be anyone in the family of the FD account holder. The person must be related to the account owner to qualify for the money.

Key Highlights:

  • Assigning a nominee to your fixed deposit can help keep your assets safe.
  • The nominee serves as a caretaker of the account.
  • The legal heir can take the FD funds from the nominee.
  • If no one claims the FD after the death of an account holder, the bank/NBFC will re-invest it and let the deposit earn more interest.