What Happens If a Bank Account Holder Passes Away Without a Nominee? Who Will Get the Money and How?

A bank account is a fundamental financial asset that ensures security and convenience in managing money. However, many people overlook an important aspect while opening an account—adding a nominee. A nominee is a person who is entitled to receive the account’s funds if the account holder passes away.

But what happens when an account holder does not assign a nominee?

This situation can lead to complications for the deceased’s family members, as claiming the money becomes a complex legal process. This article will explain why nominating someone for a bank account is crucial and what the legal heirs must do if no nominee has been appointed.

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1. Importance of Adding a Nominee to a Bank Account

Adding a nominee to a bank account is highly beneficial for several reasons:

• Hassle-Free Fund Transfer: If a nominee is added, the bank directly transfers the money to the nominee after the account holder’s death.
• Avoids Legal Complexities: Without a nominee, legal heirs must go through a detailed and sometimes time-consuming process to claim the money.
• Prevents Family Disputes: In the absence of a nominee, conflicts may arise among family members regarding the distribution of funds.
• Ensures Financial Security for Dependents: Assigning a nominee helps ensure that dependents do not face financial difficulties due to delays in accessing funds.

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2. What Happens If a Nominee Is Added?

If a bank account has a nominee, the process of claiming the money is straightforward:

• The nominee must visit the bank branch and submit the death certificate of the account holder.
• They may also need to provide their identity proof (Aadhar card, PAN card, or passport) and fill out a claim form.
• Once verified, the bank transfers the funds to the nominee’s account.

(A) Can There Be Multiple Nominees?

Yes, banks allow account holders to add more than one nominee. If multiple nominees are assigned, the money is usually distributed equally among them. However, the account holder can also specify different percentages for each nominee.

Example:

• Case 1: If Arvind assigns his wife, mother, and sister as nominees but does not specify any distribution percentage, the bank will divide the money equally among them.
• Case 2: If Karan specifies that 50% of his bank balance should go to his wife and 25% each to his mother and sister, the bank will distribute the funds accordingly.

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3. What If No Nominee Is Assigned?

If an account holder has not assigned a nominee, the funds in the account will not be automatically transferred. Instead, the legal heirs must go through a formal claim process.

(A) Who Are Considered Legal Heirs?

Legal heirs are determined based on the personal status of the deceased account holder:

• For married individuals: The spouse, children, and parents are considered legal heirs.
• For unmarried individuals: The parents and siblings can claim legal heirship.

(B) Can Legal Heirs Directly Claim the Money?

No, legal heirs cannot directly access the money. They must follow a legal procedure and provide the necessary documentation to the bank.

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4. Legal Heir Process to Claim Money from the Bank

Since there is no nominee, the legal heirs must complete a series of steps to claim the funds.

(A) Documents Required for Claiming Money

Legal heirs must provide the following documents to the bank:

1. Death Certificate of the Account Holder (to confirm the person’s passing).
2. Legal Heir Certificate (issued by local authorities to confirm rightful heirs).
3. KYC Documents of the claimant (Aadhar card, PAN card, passport, etc.).
4. Bank Claim Application Form (a formal request to transfer the funds).
5. Letter of Disclaimer (Annexure A) (if any legal heir voluntarily forfeits their right to claim).
6. Letter of Indemnity (Annexure C) (to safeguard the bank from future legal claims by other heirs).

(B) Steps to Claim the Money

1. Visit the Bank Branch: The legal heir must go to the respective bank where the deceased had an account.
2. Submit the Documents: The required documents must be submitted for verification.
3. Bank’s Verification Process: The bank reviews the claim and documents to ensure authenticity.
4. Transfer of Funds: Once verification is complete, the bank transfers the money to the legal heir’s account.

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5. What If a Legal Heir Certificate Is Not Available?

If the legal heirs do not have a Legal Heir Certificate, the bank may ask for a Succession Certificate from the court.

(A) How to Obtain a Succession Certificate?

A Succession Certificate is a legal document that certifies the rightful heir to a deceased person's financial assets. The process to obtain it is:

1. Apply in the Local Court.
2. Submit all required documents (death certificate, family details, etc.).
3. The court will conduct a hearing and verification process.
4. If satisfied, the court will issue the certificate, which can then be submitted to the bank.

This process can take several weeks or even months, making it more time-consuming than having a nominee in place.

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6. What Happens to Other Financial Assets Without a Nominee?

Apart from bank accounts, other financial instruments may also require nomination.

(A) Demat Account (Stock Investments)

• If no nominee is assigned, shares and investments must be transferred through legal heirship documentation.
• Legal heirs need to obtain a succession certificate to claim the stocks.

(B) Fixed Deposits (FDs)

• If a nominee is not mentioned, legal heirs must follow the bank’s heirship claim process.
• The same set of documents (death certificate, heir certificate, indemnity letters) will be required.

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7. How to Add a Nominee to a Bank Account?

Adding a nominee to a bank account is simple and can be done through:

1. Internet Banking: Most banks allow users to update nominee details online.
2. Bank Branch Visit: Customers can fill out a nomination form and submit it to the bank.
3. Mobile Banking Apps: Many banks provide an option to add or modify nominees via their mobile applications.

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8. Common Misconceptions About Nomination

(A) Does a Nominee Become the Owner of the Money?

No, a nominee is merely a custodian of the money and holds it on behalf of the legal heirs. If there is a dispute, legal heirs can challenge the nominee’s claim in court.

(B) Can a Will Override a Nomination?

Yes, if the deceased person’s will specifies a different distribution of assets, it will take precedence over the bank nomination.

(C) Is a Nominee Mandatory for All Bank Accounts?

While it is not legally mandatory, it is highly recommended to avoid legal complications after death.

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Conclusion

Not assigning a nominee to a bank account can create unnecessary legal hurdles for the deceased’s family. Without a nominee, legal heirs must go through a lengthy process to claim the money, which can take weeks or even months.

To avoid financial and legal complications, every account holder should immediately add a nominee to their bank account. This ensures a smooth transition of funds, preventing family disputes and legal battles.

If you haven't assigned a nominee to your bank account yet, do it today to safeguard your loved ones' financial future!