What are a nominee’s rights to investments?

Is the nominee of a bank account, fixed deposit, bank locker, and other investments automatically qualify to be the owner of such assets in the event of the death of the original holder?

-Atit Dalal

A nominee is not the legal owner of such asset and can only hold the asset in fiduciary capacity for the benefit of the legal heirs, either determined by way of a will or as per relevant succession laws.

In essence, a nominee is an individual appointed by the asset owner to hold the asset in good stead as an interim arrangement, until duly succeeded by the legal heirs and at no point has absolute title to the asset. Legal heirs are the rightful economic owner of the assets of the deceased. A nominee’s right will be on a lower pedestal vis-à-vis the rights of a beneficiary under a will and a will would prevail over nomination.

Fixed deposits and bank accounts can be held singly or jointly. Joint holding (in case of two or more than two holders) is functional via ‘jointly’ or ‘either or survivor’ or ‘former or survivor’ and ‘anyone or survivor’.

In the event of death of one of the fixed deposit/ bank account holder, the proceeds will be transferred basis the underlying mode of operation, keeping in perspective that principles of nomination can never override the laws of succession, i.e. surviving holder merely acts as the custodian of the assets until the legal heirs undertake the needful. The same has also been upheld by various Indian courts.

Are the grandchildren of a Karta also a part of his Hindu Undivided Family (HUF)? Does it make any difference if the grandchildren are the offsprings of his married daughters (and not of sons), and if they are female offspring?

—Name withheld on request

In accordance with the Hindu law, a joint Hindu family consists of all persons lineally descended from a common ancestor and include their wives and unmarried daughters. These family members can further be categorized as members and coparceners.

The concept of Hindu coparcenary, however, is much narrower. It comprises the propositus (the person from whom the line of descent begins) and three generations of lineal descendants.

Following a 2005 amendment, daughters of coparceners are now recognized as coparceners by birth, in the same way as sons. In a landmark decision, the Supreme Court affirmed that this amendment aimed to ensure equal rights for daughters.

Consequently, daughters also possess equal coparcenary rights within their grandfather’s HUF.

However, it is also essential to acknowledge that the law is not entirely clear regarding whether the children of daughters would have rights in their maternal grandfather’s HUF. Consequently, it may be prudent to seek appropriate legal guidance when dealing with cases involving such situations.

Keshav Singhania is private client leader, Singhania & Co. LLP, and Roopal Bajaj is leader-funds, Singhania & Co.

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Updated: 01 Oct 2023, 10:05 PM IST