Savings Accounts are one of the most widely used Bank Accounts. Depending on your preferences, you can deposit money into a Savings Account and you will receive interest on the deposited amount semi-annually or quarterly. There aren't any strict procedures or a lot of paperwork involved to open a Savings Account in India.
However, there are a few things that you should keep in mind while opening a Bank Account such as appointing a nominee for the account. So, who is a nominee? This blog will help you understand who is a nominee and what are the benefits of having a nominee.
What is a Bank Account Nominee?
A nominee is someone who is chosen by the Account holder to receive the deposited funds in case of an unfortunate situation like the Account holder’s death. The benefit? If you name a nominee beforehand, the bank will know that the nominee is the one who is authorised to receive the funds.
Who can be a nominee?
Given below are the eligibility criteria for a nominee:
- A nominee for a Bank Account is a person the Account holder trusts. He/ she can be a family member, child, spouse or relative.
- If the nominee is not the legal heir, he/ she won’t be entitled to keep the funds. A legal heir is someone who is lawfully entitled to inherit the funds.
- The nominee acts as a trustee, meaning he/ she must transfer the funds to the legal heir.
- An Account holder can appoint different nominees for his/ her multiple Bank Accounts.
- A minor can be a nominee but a guardian must be designated to receive the funds on the minor's behalf.
Benefits of having a nominee:
Given below are the various benefits of nomination:
- Facilitates the fund transfer process: Having a nominee can make your money management simpler. In case of the Account holder’s death, the nominee can easily access the funds.
- Reduces legal difficulties: The family can avoid legal issues by having a nominee. If there is no nominee, obtaining the funds may require court orders and a great deal of paperwork, which can be time-consuming. Having a nominee prevents these hassles.
- Makes quick access to funds possible: Having a nominee makes it possible to access the cash quickly in an emergency. This can be essential for promptly paying funeral expenses or hospital fees. In difficult circumstances, having quick access to substantial funds can be helpful.
Nominee rules in India
Knowing about the nominee rules in India is very helpful for all Account holders. Here are the key rules:
- A Bank Account for an individual generally requires a single nominee.
- If you reside in India, you may appoint an NRI as your nominee. However, the RBI must give clearance before the funds can be transferred overseas.
- The individual legally permitted to handle an account in the name of a minor may also designate someone to represent the minor.
Comparing a nominee and a legal heir
Who is a legal heir and how is he/ she different from a nominee? Refer to the table given below and get an overview of differences between the two.
Aspect | Nominee | Legal Heir |
Definition | A person designated by the Account holder to receive the funds in case of the Account holder's death | A person who inherits the deceased's assets as per the Will or inheritance laws |
Purpose | Acts as a trustee to manage or transfer the funds to the legal heir/s | Entitled to the deceased's assets and has ownership rights |
Rights to funds | Does not have ownership rights over the funds, acts as a custodian | Has full legal rights to the funds and assets |
Legal standing | Facilitates the transfer of funds but doesn't override the rights of a legal heir | Recognised by law to inherit the deceased's assets |
Flexibility | Can be any trusted person, including a non-family member | Usually, a family member is defined by inheritance laws or the deceased's Will |
Bank procedures | Simplifies the process of transferring funds at the time of the Account holder's death. | Involves legal processes such as Probate to claim the assets. |
Conflict potential | Minimises disputes by clearly defining who manages the funds initially | This can lead to disputes if there is no clear Will or agreement among the heir/s |
What Happens When There is No Nominee?
If no nominee is registered in a bank account, the claim settlement process may become longer and more documentation intensive. In such cases, legal heirs may be required to submit succession certificates, indemnity forms or other legal documents to claim the funds. The absence of a nominee does not prevent rightful claim, but it may delay access to the account balance. Registering a nominee for a bank account simplifies transmission of funds and reduces procedural complexity during unforeseen events.
Conclusion
Open a Savings Account with complete knowledge and appoint a nominee for your account to ensure that your money stays within the family. While opening a Savings Account with ICICI Bank, always remember to have a nominee.
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