Difficulties claiming bank deposits and FPs without nomination

“All the legal heirs, including two of my sisters-in-law, had to sign an affidavit. They both don’t live in Jamnagar and I had to run from pillar to post for five months to complete the process. And as if that were not enough, the bank manager also asked us to obtain the signatures of two non-family members as well as their tax returns, which should have been greater than the FD amount,” said she declared.

In another such case, a London resident and his two siblings are struggling to get their rightful claim over their deceased parents’ money which has been sitting in bank deposits and lockers for nearly seven years. “My parents were candidates in each other’s accounts. They died less than a year apart and we haven’t bothered to change the appointments in the meantime,” said the London resident, who also did not want to be identified. “Like my two parents had no wills and neither of us were nominated we are unable to access their savings of approximately 70 million.”

Stories like these serve as a reminder of the importance of reporting your appointments to banks to ensure your heirs have easy access to accounts. Financial planners told Mint that such stories are common because the majority of people do not check or update their appointments on bank accounts, investments, insurance, etc., regularly.

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“There may also be cases where already registered nominations are canceled when a bank or the regulator proposes a new policy. Or a case where your candidate has died and you forget to update the nomination. This is a good convenient to check nominations once a year to avoid hassles later,” said Amit Suri, a Delhi-based financial planner.

When a candidate is not nominated, the legal heirs must go through a cumbersome legal process to obtain the claim. This article tells you about the challenges heirs may face if the primary holder of a bank account and provident fund (PF) dies without naming a proxy and what steps are needed to claim the settlement.

Certificate of inheritance

Banks transfer funds to legal heirs based on a Certificate of Inheritance, which all legal heirs are required to obtain. This process can take up to a year and can cost a fortune.

“We siblings were unable to appear in court in Delhi at the same time as my brother and I live in the UK. We decided to give power of attorney to our sister to get the inheritance certificate alone, but the process will either take a year or we will have to spit 15 lakh to expedite the process through lawyers,” the London resident said.

Alternatively, some banks may also settle the claim against an affidavit signed by all heirs with a bond of indemnity. This is generally accepted when the amount of the claim is small.

“The Reserve Bank of India (RBI) has allowed banks to set (keeping in mind their risk management systems) a minimum account balance threshold up to which claims can only be settled on the basis of ‘a letter of indemnity,’ said Sonam Chandwani, Managing Partner, KS Legal & Associates.

Rajat Dutta, Founder and Initiator of Inheritance Needs Services, added: “The cost of obtaining an Inheritance Certificate, including court costs and attorney fees, starts at 1.25 lakh and can be higher in cases where the court costs and attorney fees depend on the percentage of the asset value.

Keeping this in mind, banks are asking for a joint application from the legal heirs as well as a surety bond to save time and money for the heirs.”

In either case, the heirs are also responsible for proving to the bank through a statement in a newspaper or an affidavit that there is no dispute between the claimants with respect to the estate.

However, before taking any of these routes, check whether the deceased left a will or not. Banks transfer funds based on inheritance rules as set out in the will, but conditions still apply.

“If the will produced by the applicant is a normal will, the bank must obtain the consent of all the legal heirs of the deceased person before releasing the deposit. If the will is probated, banks do not need to obtain the consent of the legal heirs,” said Rathish R, senior vice president and national head – deposits, fee income and corporate banking.

A probated will is certified by a court.

“A will can be amended multiple times and there is no way for banks to know whether the will submitted by the applicant is the most recent or not. The probated will is certified under the seal of the court and has legal validity which could be accepted by the bank. So, a will other than the probated will is considered normal,” Rathish added.

Note that simply naming a nominee in a bank account does not default to the same person being named on deposit or in lockers with the same bank.

“The appointment must be registered separately under Bank Account and Fixed Deposits for them to be valid,” said Jojo Antony, Joint Managing Director – Facilities Management Group, South Indian Bank.

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