We must plan for the seamless transfer of our money and assets to those we intend to leave them to after our demise. Unfortunately, many people mistakenly assume that merely nominating someone for each asset is sufficient and nomination per se automatically transfers ownership to the nominee after the death of the account holder or asset owner. In reality, asset ownership works very differently.
Who is a nominee?
Let’s say Karthik appointed his 21-year-old daughter, Sudha, as the nominee for all bank deposits and savings account. This means Sudha is merely the designated person to receive the money from the bank after Karthik’s demise; she is not the sole owner of the funds released by the bank. In other words, nomination ensures a smooth and hassle-free release of funds by the institution, but does not confer ownership.
Legally, in most cases, a nominee merely acts as a custodian or trustee, receiving or holding the money or asset on behalf of the legal heirs who are the rightful owners under the inheritance law. For instance, assume Karthik is also survived by his mother, wife and a son. In that case, the mother, wife, his son and daughter are all his legal heirs and legally entitled to his monies and assets. Therefore, though the bank may hand over the funds/assets to his daughter, who is a nominee, the legal heirs are entitled to claim their lawful share in accordance with the succession law. In short, the nominee acts only as a custodian, whereas ownership of the funds or assets vests in the legal heirs.
Why nominee is paid?
After the demise of an account holder, the bank/financial institution releases the funds to the nominee to avoid delays and administrative complications. They are more concerned with the seamless transfer of funds; questions of ownership are beyond their purview. Payment to the nominee enables the bank to close the account and discharge its responsibility.
However, such payment neither determines/transfers ownership of the funds nor overrides legal heir rights under respective succession laws.
Who is a legal heir?
A legal heir is the one who is entitled to inherit the money/assets of the deceased person under succession law or a valid Will. In short, they are the rightful legal owners of the funds. In Karthik’s case, his mother, wife, son and daughter are all legal heirs.
Legal heirs are determined by personal laws such as the Hindu Succession Act, Indian Succession Act, the Muslim Personal Law (Shariat) Application Act, 1937 or any other applicable inheritance laws.
The Hindu Succession Act is applicable to Hindus, Jains, Buddhists, Sikhs, and includes Virashaiva, a Lingayat or a follower of the Brahmo, Prarthana or Arya Samaj. The Indian Succession Act applies to Christians and Parsis and, by implication, to Jews and others not governed by the Hindu or Muslim personal law. For Muslims in India, inheritance and succession matters are governed by the Muslim Personal Law.
In the absence of a valid Will, these laws determine who the heirs are and the proportion in which they are entitled to inherit the deceased person’s assets. Where a valid Will exists, it governs inheritance, but succession laws apply to assets not covered by the Will or where the Will cannot legally operate.
In Karthik’s case, if he passed away without leaving a valid Will, the manner in which his money and assets are distributed to his legal heirs will be determined by the applicable succession law based on his religion. If Karthik is a Hindu, then, as per the Hindu Succession Act, his mother, wife, son, and daughter would inherit his assets as legal heirs in the manner prescribed under that law, irrespective of who is named as the nominee. Therefore, even if Karthik had appointed his daughter Sudha as the nominee, such nomination would not make her the sole owner of the funds or assets, nor would it confer full ownership upon her.
What if there is a Will?
If Karthik had executed a valid Will, his assets would be distributed in accordance with the Will, and the provisions of the Hindu Succession Act would apply only to any property not covered by the Will.
Succession laws would apply only to assets not covered by the Will or where the Will is invalid or incapable of being given effect to. Nomination eases fund transfer and does not determine ownership. Relying only on nomination is not estate planning and money/assets may not be distributed/transferred as intended. Note: while nomination rules and succession laws apply to most financial assets, insurance cover operates differently.
(The writer is an NISM & CRISIL-certified Wealth Manager and certified in NISM’s Research Analyst module)
Published – January 19, 2026 06:04 am IST
