Fixed deposits (FDs) have long served as a cornerstone of Indian household savings. Frequently, these accounts are established by grandparents years in advance and may be overlooked by the family following their passing.
Complications often arise when family members discover these assets later, only to find there is no formal Will, or that the specific fixed deposits were inadvertently excluded from the document.
In these scenarios, grandchildren might be uncertain of their legal standing or mistakenly believe that only the most immediate surviving heirs are entitled to the funds.
Navigating this requires an examination of relevant personal statutes, such as the Hindu Succession Act, 1956, or the Indian Succession Act, 1925, to determine how assets should devolve.
Legal experts clarify that under the Hindu Succession Act, Class 1 heirs inherit the estate simultaneously and in equal proportions. Notably, the children of a pre-deceased son or daughter are categorized as Class 1 heirs. Consequently, these grandchildren possess the same simultaneous and equal rights to the FDs as any surviving children of the deceased grandparent.
“For instance, in the case of Hindus (covered under the Hindu Succession Act), Class 1 legal heirs inherit simultaneously and equally. Children of pre-deceased sons or daughters of an individual are considered Class 1 legal heirs. This means that such grandchildren have simultaneous and equal rights, as any other sons or daughters or other Class 1 legal heirs of the deceased grandparent,” said Varun Sriram, Partner, JSA Advocates & Solicitors, according to Moneycontrol.
“The Courts in India have observed that Section 45ZA of the Banking Regulation Act, 1949 puts the nominee in the shoes of the depositor after his death and clothes him with the exclusive right to receive the money lying in the account. But it by no stretch of imagination makes the nominee the owner of the money lying in the account,” Sriram added.
The Nominee’s Role
Usually, a depositor designates a nominee when opening an FD. However, it is crucial to recognize that the nominee does not automatically become the ultimate beneficiary. Legally, the nominee acts as a trustee upon the holder’s death; they are responsible for holding the funds and ensuring they are transmitted to the rightful legal heirs according to succession laws if a Will is absent.
Standard banking practice requires the nominee to submit an affidavit confirming the money is held in trust and undertaking to disburse it once the legal heirs are determined. Typically, the nominee must provide the bank with an indemnity bond, the depositor’s death certificate, and updated KYC documentation.
Procedures Without a Nominee
If no nominee was appointed, the claim does not simply lapse. Instead, legal heirs may approach the bank directly with documentation establishing their right to the deposit to initiate the settlement process.
Securing the fixed deposits of deceased grandparents is less about overcoming complex legal hurdles and more about a methodical approach to paperwork. Banks operate based on strict regulations rather than sentiment; therefore, delays usually stem from documentation gaps rather than entitlement disputes.
The Importance of Planning
For families, this serves as a reminder that fundamental estate planning — including updated nominations, a clear Will, and organized financial records — can protect the next generation from unnecessary administrative stress.
