Nomination and weird rules

I am regular reader of JagoInvestor and recently came across this awesome post on nomination by Manish. I thought, I was well versed by the nomination rules and understood the concept about the difference between nominee and legal heirs. Well, to my surprise, I did find some shockers and it left me amazed by the absurdity of the old rules which probably needs some change.

I would suggest you go through the entire post, but here are the two shockers that hit me:

1) Nomination in Shares: In the basic sense, a nominee is just entitled to receive the money disbursed by the company and is responsible for distributing it to the legal heirs. But in case of shares, the nominee is the one who is the owner of the shares unless you have left a will. Here is what Manish writes

It means that if you have not written a will, anyone who has been nominated by you for your shares will be the ultimate owner of those stocks, The succession laws on inheritance will not be applicable but in case, you have made a will, that will be the source of truth.

2)  Nomination in PPF: I am just quoting Manish verbatim:

Let me give you some shock first. If you have Rs 10 lakh in your public provident fund (PPF) account and you have not nominated anyone for your PPF account, your legal heirs will get maximum of Rs1 lakh only! Yes, it’s so important to have a nominee, now you get it . You can nominate one or more persons as nominee in PPF. Form F can be used to change or cancel a nomination for PPF. Also note that you cannot nominate anyone if you open an account for a minor.

This is a real shocker, since in both cases, it becomes absolutely mandatory to have nominee assigned as well as a death-will clearly mentioning whom you want the money to go after your death. The conclusion is that you have be absolutely careful while filling nomination forms and you should plan for leaving a will. Thank you Manish for the wonderful post.

UPDATE: One of the interesting aspect about, not having a nomination for the saving account and when you try to claim that money as a legal heir, is that the banks fix a threshold limit of the money lying in the saving account, within which bank only expect a letter of indemnity for any claim. But if the money lying in the saving account is more than the threshold limit, then banks needs multiple documents (Letter of Indemnity from all claimants, Claim Form signed by all claimants etc), and it will try to make enquiries that there are no other claimants to the money lying in the saving account. Another thing which banks needs in this case is “Surety”. A surety is a guarantee to assume responsibility arising out of any future claimant for the money in the saving account.

The threshold limit can vary from bank to bank (for e.g. State Bank of Mysore has a threshold limit of Rs 50K[PDF]). So say if you want access to the money in saving account of your deceased parents in State Bank of Mysore, if the balance is < Rs 50K  you just need to furnish letter of indemnity, but if the balance is more than that (say 2 Lakh), apart from multiple documents that you need to submit, you may have to submit a surety of amount much larger than the balance (may be  say Rs 5Lakh) depending on the bank.


  1. Anonymous6:55 AM

    I think that the interpretation is wrong for PPF. What happens if the balance is more than 1 lakh, would the legal heirs get only 1 lakh? What happens to the balance amount?

    IN my humble opinion, the legal heirs wiil get the balance amount only on getting a succession certificate, which takes quite an amount to get. The limit of Rs 1 Lakh is an interim payment.

    In no case, the govt can forefeit the amount. And ofcousre, to avoid all these complications, one should always nominate.

  2. Thank you anonymous for visiting my blog. Yes what you mention is correct but getting a succession certificate is in itself a complicated process. The balance amount will be disbursed to the legal heirs on providing the succession certificate. I will update the blog post to avoid confusion.

  3. Anonymous11:29 AM

    My deceased grandma (my maternal grandfather's sister) who did not have husband or any descendent of her had nominated me for her FD (Rs. 3 L) in a bank. but she had mentioned my name as she used to call me and not my official name (as it is in my school certificates or my voter id). the bank asks for succession certificate. is it necessary or is there any other way to claim the money? please advice.

  4. Hi Anonymous,

    RBI does not mandate banks any specific rules regarding verifying the nominee upon death of depositor. But banks will need a proof that who-ever mentioned in the FD is indeed you. Please contact your local lawyer & the bank to check if any affidavit can be made to indicate that the name mentioned in FD is you. If that is not possible, then succession certificate is the only way.

    But note that being a nominee only entitles you to get the 3L money. you can not use it entirely since you still need to distribute this 3L to legal heirs as per the will made by your grandma or if no will present then as per Succession Act.

    BTW check out my post on succession certificate