Importance of Nominee in a Bank account
The money that we save either lie in our savings account, recurring deposits or fixed deposits. We need to be diligent enough to appoint a nominee for family’s security. What if the main earning member of the family dies and his legal heir like his/her spouse and children have no idea about what money is left and in which bank?
What does Nomination in a Bank Account mean?
FDs, PPFs, LIC, MFs and Bank deposits all need a nomination. The amount lying in an account goes to the nominee for all the assets in case of the holder’s death, him or her being the right person. Which is why bank wants us to mention the nominee when an account is opened. This facility ensures that the money reaches the holder’s loved ones in their absence.
What happens when no nominee is mentioned?
Without a nominee the rightful heir shall have to produce a court order or a succession certificate to claim money. Though there is no such mandatory requirement it is a wise step to always appoint a nominee.
Procedure to appoint the Nominee:
- Individuals, single or joint account holders can appoint a nominee. An HUF, society and Trust cannot appoint a nominee.
- Nomination can be done only in the name of a single person in case of each of the accounts.
- Only an individual can be appointed as a nominee.
- It is always advisable to have a nominee so that questions do not arise upon death of the holder.
- Even after the date of the investment, a nominee can be appointed on a later date. But mostly the bank will insist on appointing the nominee at the time of opening fixed deposit account itself.
- While opening a fixed deposit, the bank asks for details of the nominee in a form, in the specified column.
- Certain banks allow the account to be transferred to the surviving account holder in case of death of one of the joint account holders. When both are dead the money is transferred to the nominee.
- A new nomination can be added by filling up form DA1 in case there is no nomination or there has been cancellation of a nomination. The form will require details of all the account holders.
- Even a minor can be appointed as a nominee. The details of the minor’s legal guardian who should be an adult, will be mentioned in the form. Address and photograph of both the minor and the Guardian are required. Until the minor reaches the age of maturity, the legal guardian will receive the amount on the minor’s behalf.
- The nominee is the legal heir of the account holder. Sometimes the nominee could well be a trustee of the funds of the account holder. Acting as a custodian of the funds until the legal heir can legally claim the fund.
- To cancel a nomination, the account holder must fill up form DA2 requiring the name and address of the nominee whose name is going to be cancelled along with details of the account and the account holders.
- The nominee receives the funds only on death of the account holder. In case of a joint account the nominee will receive funds on death of all account holders.
- When there is a change in the name of the nominee form DA3 is to be filled.
To minimise the hardships to be faced by the legal heir in the event of death of the account holder, every account holder should advisably specify a nominee.