When you open a bank fixed deposit, invest in mutual funds or put money in small savings schemes like the Public Provident Fund (PPF), you are typically asked to nominate a person who can receive the funds in the event of your death.
This helps banks and financial institutions identify whom to approach for settling the investment. However, many investors assume that nominating someone automatically makes them the legal owner of the money after their death.
Who is a nominee’s role?
A nominee only acts as a custodian of the assets, which may include mutual funds, PPF corpus or fixed deposit money, until they are transferred to the rightful legal heirs. Such a person has no ownership rights over these assets unless they are also a legal heir, such as the deceased investor’s spouse, children or parents.
The purpose of having a nominee is to facilitate the smooth settlement and transfer of assets after the account holder’s death.
You can designate a trusted and eligible person as a nominee for your assets, who can be your spouse, sibling, family member or relative.
It is also important to review and update nominations after major life events, such as marriage, divorce, the death of a nominee, or the birth or adoption of a child, to ensure that your nominations reflect your wishes.
What determines the ownership of assets
The final ownership of money in a bank account, mutual fund, or other assets is determined by a valid will, succession laws, and the rights of legal heirs, not merely by the nominee mentioned in the account.
If the deceased person has left a legally valid will, the assets are distributed according to that will. In the absence of a will, the applicable inheritance or succession laws decide who has the rightful claim over the money and property.
Earlier, obtaining probate of a will was mandatory for inheritance involving assets in certain cities across India. It is a legal process through which a civil court verifies the authenticity of a will and authorises the executor named in it to administer the deceased person’s estate.
However, following a legal change in 2025, probate is no longer mandatory in these cases. It can still be obtained voluntarily, particularly when family disputes are anticipated, multiple executors or beneficiaries are involved or the estate includes institutional, banking or cross-border assets.
How does PPF, FD and MF transfer work
In the case of PPF accounts, it shall be closed after the investor’s death and the nominee or legal heir can claim the balance available in the account after submitting the prescribed documents to the bank or post office.
Once the claim process is completed, the entire eligible balance is paid to the nominee or legal heir, and the account is closed permanently.
For mutual funds, a legal heir or nominee must submit a transmission request to the asset management company or its registrar, which typically processes it based on a standard set of documents.
If a nominee or legal heir wants to claim the proceeds of a bank fixed deposit after the account holder’s death, the process is pretty similar to that of mutual funds. They must submit a claim to the specified bank along with the death certificate and other required documents.
Key documents for smoother inheritance process
A comprehensive estate plan usually includes several legal documents that clearly state a person’s wishes and explain how their assets should be distributed among family members in the event of their death.
While not every component is necessary for everyone, the following documents may be included, depending on your financial situation and needs:
- Will: A legal document that states how your assets should be distributed and, if applicable, names guardians for minor children. This is the most common way of dividing assets and must be considered.
- Trusts: Helps in managing assets, reducing estate taxes in some cases, and avoiding probate (the legal process of transferring assets after death).
- Beneficiary designations: Ensures assets such as life insurance, retirement investments such as PPF and other such assets are directly transferred to a named beneficiary without going through the probate route.
A well-prepared estate plan ensures the original owner’s wishes are honoured, minimises the risk of disputes among legal heirs in the later stage, and provides clarity during an emotionally difficult time. It is typically prepared with the assistance of an estate planning lawyer.
