Due Diligence. Don’t forget to nominate

The one thing that you must not forget to do every time you open a bank account or a locker is to choose a nominee. Unless you remember to do that, your family won’t have easy access to them after your demise.

A nominee is a person chosen by you as the trustee of your bank account (savings and deposit) and/or locker. The bank transfers the money in your accounts along with the contents of your locker to your nominee, after you are gone.

But, though the nominee is the recipient, he/she is not the owner and is only a trustee who has to distribute what he has received among the legal heirs (can include the nominee too) of the deceased person.

Ideally, you should fill up the nomination form at the time of opening a bank account or locker. But if you have forgotten to do so, you can always choose a nominee even at a later date. The sooner you do it, the better. You can also remove or change the name of the nominee at any point in time.

Once you are no more, the nominee for your accounts and lockers (can be different individuals) will have to submit to the bank the original account holder’s death certificate; and his/her identity and address proof.

After the bank has satisfied itself of the nominee’s identity, it closes the original bank accounts and transfers the money to the nominee’s account or pays it off to him/her. Likewise, the nominee is given access to the lockers.

If you do not specify a nominee, the bank will transfer the money or allow access to the locker only to your legal heir(s).

According to the Hindu Succession Act, in case of a deceased Hindu man, these will include the man’s wife, children and mother.

Your family members will have to prove to the bank that they are indeed the legal heirs for which they will have to submit a succession certificate issued by the court. This can take a few months’ time or even stretch into years if your petition is contested. Several other documents also have to be submitted.

These include the death certificate, the identity and address proof of the legal heirs and document of indemnity signed by all the legal heirs; the latter protects the bank from future litigation by any of the legal heirs.

A letter of disclaimer signed by all legal heirs requesting for transfer in the name of one or some of them too, has to be provided.

For instance, if everything is being transferred only to your wife and children, then the letter of disclaimer will serve as an assurance that the deceased person’s mother, who too is a legal heir, has assented to the transfer.

This entire process can take quite some time and cause great inconvenience if your family is in dire need of money.

On the other hand, having a nominee can save your family from all the trouble.

While having a nominee is of utmost importance, this alone may not always suffice. Let’s understand this with an example of a man with a wife and a son. Suppose the man wants that after he passes away, only his wife should have access to his bank assets, as long as she lives. Then, he can make her the nominee, so that the bank transfers everything to her. But, since the son too is a legal heir, he can approach the court for his share of the bank assets. If the court passes an order in favour of the son, then the mother will have to part with the son’s share.

To ensure that the bank assets go only to the wife, the man must leave behind a will clearly stating so.

Alternatively, in this particular example, the man can make his wife a joint holder, with an ‘either or survivor’ option.

This will ensure that the wife continues to have access to the accounts and lockers, even after the husband’s demise. Then, the nominee (who can be the son) comes into the picture only after both the parents pass away.

While having a joint holder helps, it does not mean you shouldn’t specify a nominee. This is because, once all the account holders are gone, the bank won’t allow access to anyone except the deceased’s legal heir.

So, do nominate, but give it careful thought.

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