Ever encountered a situation where you’ve had to nominate someone? From opening a bank account, Fixed Deposit, or Demat Account to getting life insurance, we are usually required to assign a nominee. 

Let’s assume, for story-building sake, that a person nominates his girlfriend as a nominee to one of his FDs. In the unfortunate event of something happening to him, the proceeds of his fixed deposits should go to his girlfriend. But, will it?  

There’s a small catch. His girlfriend should be mentioned as the rightful owner of this Fixed Deposit to ensure a smooth transfer without any hassle. This brings me to the crux of this article. 

The nominee is not the rightful owner. The legal heir has rights over the funds.

A nominee is just a temporary holder of your funds. They do not have a right to the wealth of a deceased person. Ideally, even if the bank transfers the funds to the nominee, the legal heir can claim this at any point in time. In other words, one can say the nominee will look after funds until it is given to the legal heir. 

Also Read: A failed love story made Akash change his Demat nominee. Know how he did it

What is a Will? 

Before I dive into explaining who the legal heirs are, it’s vital for you to understand what a Will is, and the importance of a Will in determining the transfer of assets. A Will is a written document that is drafted by a person, to determine the transfer of assets in a specified proportion after his/her demise. 

Let’s understand with an example: 

Mr A wants to draft a Will. He currently owns two estates, a few stocks and bonds, and a couple of FDs. Let’s say, he wants his wife and two kids to enjoy his assets after his demise. 

Therefore, in his Will, he will clearly specify, who will receive what. He mentions, that his wife will get both the estates. One of his kids will receive the stocks and bonds. The other kid will receive the FDs. 

A Will makes the transfer process easier. It reduces the legalities involved in transfer of assets and also reduces the chances of conflict among parties that are to receive the assets. 

What happens in the absence of a Will?

In the absence of a Will, according to the Hindu Succession Act, assets of the deceased will be equally split and transferred to the legal heirs. Irrespective of being a nominee, a person does not truly have rights to the assets. It will be split equally among the legal heirs. 

Legal heirs can be further divided into Class I heirs and Class II heirs. The rights of a Class I heir supersede those of Class II heirs. Meaning the only time Class II heirs will get a share in property, is in the absence of any Class I heirs. 

The following are Class I heirs:

• Spouse
• Mother
• Children

The following are the Class II heirs:

• Father
• Siblings
• Grandchildren
• Great Grandchildren
• Other Relatives

So what’s the takeaway here? Once you have nominated a person for a particular asset, make sure to specify that this person will get the asset in your will. This ensures smooth transfer of your assets avoiding too many legalities and quarrels. 

Also Read: How A Tata Sumo Owner Got Motor Insurance Claim After Driver Disappeared With The Vehicle

Exceptions

Here’s something interesting though. There are two situations in which the nominee will get the proceeds, irrespective of the legal heirs. To be more specific, two of these assets will transfer the proceeds to the nominee only. They are Employee Provident Fund (EPF) and Proceeds from Life Insurance. Hence make sure you’re nominating the right person to these accounts, else at least make sure to update them to ensure the right person receives the proceeds.