Nominee vs Legal Heir in India: Who Actually Gets the Money? (2026)
Last updated: 13 October 2026
Quick answer: In the nominee vs legal heir question, the nominee collects the money and the legal heir owns it. For bank deposits, mutual funds and shares, the Supreme Court has held that a nominee holds the money for the heirs under the will or succession law. Life insurance is a partial exception: a spouse, parent or child named as nominee can usually keep the claim.
Last updated: 13 October 2026 Quick answer: In the nominee vs legal heir question, the nominee collects the money and the legal heir owns it. For bank deposits, mutual funds and shares, the Supreme Court has held that a nominee holds the money for the heirs under the will or succession law. Life insurance is a partial exception: a spouse, parent or child named as nominee can usually keep the claim. Key takeaways Bank: nominee is not the owner ( Ram Chander Talwar , Supreme Court, 2010); up to 4 nominees since 1 November 2025. Shares and MFs: nomination is not a mode of succession ( Shakti Yezdani , 14 December 2023); up to 3 nominees since 1 September 2026. Insurance: since 2015, Section 39(7) makes a spouse, parent or child a "beneficial nominee". No nominee: heirs need indemnities, affidavits or a court document, depending on the amount. Fix: make your nominee the same person your will names for that asset. Here is a situation financial planners see every year. A man names his mother as nominee on his bank FDs when he is single. He marries, has a child and writes a will leaving everything to his wife. He never updates the FDs. When he dies, the bank pays his mother. Is the money hers? Almost certainly not. The bank was right to pay her, but she holds the money for his wife under the will. Getting it back can mean an awkward family conversation, or a civil suit. This guide explains, as of October 2026, what a nominee is, what a legal heir is, what the Supreme Court has said, how the rules differ for bank accounts, mutual funds, demat, insurance, EPF and small savings, and how to make sure your family never faces this conflict. What is the difference between a nominee and a legal heir? A nominee is the person you name on an account, folio or policy to receive the money when you die. A legal heir is the person entitled to inherit your property: either the beneficiary named in your will, or, if there is no will, the relatives named by your personal succession law, such as Class I heirs under the Hindu Succession Act, 1956. Nomination is a convenience for the institution. It tells the bank or fund house whom to pay, so it does not have to wait for a succession certificate. Once it pays the nominee, it is legally discharged. Ownership is a separate question, answered by your will or succession law. Comparison of the roles of a nominee and a legal heir in India What has the Supreme Court said about nominee vs legal heir? The courts have been consistent for four decades. Three Supreme Court decisions matter most. Case Asset What the Supreme Court held Sarbati Devi v. Usha Devi (1984) Life insurance (old Section 39) A nomination is not a will and gives no ownership. The nominee receives the policy money for the legal heirs. Ram Chander Talwar v. Devender Kumar Talwar (2010) Bank deposit (Section 45ZA, Banking Regulation Act) The nominee steps into the depositor's rights over the account, but does not become owner. The money is part of the estate. Shakti Yezdani v. Jayanand Jayant Salgaonkar (14 December 2023) Shares and securities (Companies Act and depository bye-laws) Nomination does not give absolute title and is not a third mode of succession. Succession law prevails. Shakti Yezdani , decided by Justices Hrishikesh Roy and Pankaj Mithal, settled a question that had confused investors since a Bombay High Court ruling had suggested share nominees took full ownership. The court read the word "vest" in company law as a temporary arrangement to let the company discharge its liability, not as a transfer of ownership. SEBI's own rules now say the same. Its transmission framework of 23 July 2026 states that nominees receive a deceased holder's securities as trustees for the legal heirs. Nominee vs legal heir rules by asset India has no single nomination law. Each asset follows its own statute and regulator, which is why the answer to "who gets the money" can differ within one family's portfolio. Asset Governing rule Max nominees Does the nominee own it? Bank deposits Banking Regulation Act, s.45ZA, as amended by Banking Laws (Amendment) Act, 2025 (nomination provisions from 1 Nov 2025) 4, simultaneous or successive No: holds for heirs Bank lockers and safe custody Same Act 4, successive only No: access only Mutual fund folios SEBI circular of 29 May 2026 (from 1 Sep 2026) 3 No: trustee for heirs Demat shares, bonds, ETFs SEBI circular of 29 May 2026; Companies Act s.72 3 No: Shakti Yezdani Life insurance Insurance Act, 1938, s.39 (amended 2015) One or more Yes if spouse, parent or child (beneficial nominee); otherwise no EPF EPF Scheme, 1952 One or more family members Paid to nominee; heirs' rights depend on facts PPF and post office schemes Government Savings Promotion rules One or more Paid to nominee; generally held for heirs Bar chart of maximum nominees in India: four for bank deposits and lockers, three for mutual funds and demat accounts Bank accounts and FDs Since 1 November 2025, depositors can name up to four nominees. With simultaneous nomination, each gets a stated percentage. With successive nomination, the second steps in only if the first has died. The RBI's September 2025 directions on deceased customers' claims say that paying the nominee or survivor fully discharges the bank, and it may not demand a succession certificate, probate or indemnity from them. That is speed, not ownership: Ram Chander Talwar still applies. Our joint holding vs nomination (/insights/joint-holding-vs-nomination) guide explains how "either or survivor" accounts work alongside this. Mutual funds and demat accounts Under SEBI's circular of 29 May 2026, you can name up to three nominees per folio or demat account. If one nominee dies before you, their share goes pro rata to the surviving nominees. If all nominees have died, the holding goes through the legal-heir route. Details are in our guides to nomination rules for mutual funds and demat (/insights/nomination-rules-mutual-funds-demat-2026) and mutual fund transmission (/insights/mutual-fund-transmission-after-death) . Life insurance: the beneficial nominee exception The Insurance Laws (Amendment) Act, 2015 rewrote Section 39 of the Insurance Act. Under Section 39(7), if the nominee is the policyholder's spouse, parent or child (or any of them), they are "beneficially entitled" to the claim. In plain terms, they can keep it, unless it is shown that the policyholder could not legitimately confer that benefit. Nominees outside this circle, such as a brother, collect the money for the legal heirs, as in Sarbati Devi . Comparison of beneficial nominees and other nominees under Section 39 of the Insurance Act The courts have not read this uniformly. The Andhra Pradesh High Court (2023, Mallela Manimala ) let a wife named as nominee keep the full amount. Other High Courts have said a beneficial nominee does not automatically extinguish other heirs' rights; the Allahabad High Court in Kusum v. Anand Kumar (2025) sent the question to a civil court. As of the latest commentary we reviewed, the Supreme Court had not ruled on the amended section. The safe course: if you want your spouse or child to keep the policy money, name them as nominee and say so in your will. EPF, PPF and small savings EPF requires that, if you have a family, your nominee be a family member. EPFO pays the nominee on a death claim. For post office schemes, including PPF, the nominee is paid regardless of amount without legal evidence. Without a nominee, heirs can claim up to ₹5 lakh per account without a succession certificate, after six months, under India Post's guidelines. Our claims checklist (/insights/claim-deceased-parent-investments-checklist) lists the forms for each. A worked example: one family, three outcomes Anil, a 45-year-old Hindu IT manager in Pune, dies in 2026. His will leaves everything to his wife, Meera. His assets and nominations are: Bank FDs of ₹20 lakh , nominee: his mother (set up before marriage). Mutual funds of ₹35 lakh , nominee: Meera. Term policy of ₹1 crore , nominee: his brother. Endowment policy of ₹10 lakh , nominee: his daughter. What happens: The bank pays the ₹20 lakh to his mother. She holds it for Meera under the will. Meera can ask for it, or sue if refused. The ₹35 lakh of mutual funds goes to Meera as nominee, and she is also the owner under the will. No conflict. The insurer pays ₹1 crore to his brother. A brother is not a beneficial nominee, so he holds it for Meera, the legatee. The ₹10 lakh endowment claim goes to his daughter as a beneficial nominee. She can likely keep it, even though the will says "everything to Meera", subject to the court divergence above. Had Anil died without a will, the FDs, mutual funds and term cover would have been owned by his Class I heirs: Meera, his daughter and his mother, in equal shares. Two quick nomination updates would have avoided most of this. Our guide on how to write a valid will in India (/insights/how-to-write-valid-will-india) shows how to draft the will itself. Four-step flow showing how money moves from nominee to legal heir when a will and nomination conflict What happens if there is no nominee? Then the legal heirs must prove their claim. The paperwork scales with the amount: Banks: up to ₹15 lakh (₹5 lakh for co-operative banks), a simplified claim with an indemnity, heirs' no-objection and proof of heirship. Above that, a succession certificate, legal heir certificate or similar is usually needed. Mutual funds: up to ₹10 lakh per fund house for non-demat units (₹30 lakh in demat), indemnity plus a heirs' affidavit-cum-NOC. Above that, a will, heirship certificate or court document. Post office schemes: up to ₹5 lakh per account without legal evidence. Every route is slower than a nominee claim. That is why "my will covers it" is not a reason to skip nominations. How to align nominations with your will List every nomination. Pull your mutual fund CAS, check each bank, your demat accounts, policies, EPF (via the UAN portal), PPF and NPS. Match nominee to intended owner. For each asset, the nominee should be the person your will gives it to. Then the nominee's trusteeship never matters. Use percentages deliberately. If two children should share equally, say 50/50 on each folio and account. Use the insurance exception on purpose. Name a spouse or child if you want them to keep the cover. Avoid "convenience" nominees like a sibling. Name a guardian or appointee for a minor nominee. Review after every life event : marriage, divorce, a birth, a death. Our guides on planning after divorce or widowhood (/insights/financial-planning-after-divorce-widowhood) and the newly married checklist (/insights/newly-married-financial-checklist) include nomination steps. Related reading How to write a valid will in India (/insights/how-to-write-valid-will-india) Claiming a parent's investments after death: checklist (/insights/claim-deceased-parent-investments-checklist) Nomination rules for mutual funds and demat in 2026 (/insights/nomination-rules-mutual-funds-demat-2026) Joint holding vs nomination (/insights/joint-holding-vs-nomination) Estate planning in India: complete guide (/insights/estate-planning-guide-india) Frequently Asked Questions Can a nominee claim ownership of a bank account in India? No. In Ram Chander Talwar v. Devender Kumar Talwar (2010), the Supreme Court held that a nominee under Section 45ZA of the Banking Regulation Act receives the depositor's rights over the account but does not become the owner. The bank pays the nominee and is discharged, but the money forms part of the estate and goes to the heirs under the will or succession law. Who gets life insurance money, the nominee or the legal heir? It depends on who the nominee is. Since the 2015 amendment, a spouse, parent or child named as nominee is a "beneficial nominee" under Section 39(7) of the Insurance Act and can generally keep the money. Any other nominee collects it for the legal heirs. High Courts have differed on the details, so naming the same person in your will adds certainty. Does a will override a nomination? For bank deposits, mutual funds and shares, yes in effect. The institution still pays the nominee, but the nominee holds the money for the person named in the will. For life insurance with a spouse, parent or child as beneficial nominee, the nomination may prevail. The cleanest plan names the same person in both places. What if the nominee dies before the account holder? The nomination for that person lapses. For mutual funds and demat accounts under SEBI's 2026 rules, the deceased nominee's share goes pro rata to surviving nominees; if none survive, heirs must claim. For bank accounts with successive nominees, the next nominee steps in. Update your nominations as soon as a nominee dies. Can legal heirs challenge a nominee? Yes. A legal heir or legatee can ask the nominee to hand over the money and, if refused, file a civil suit. They cannot usually stop the institution from paying the nominee unless they obtain a court order before payment. Most families settle the matter through a simple family settlement deed instead of litigation. Is a nominee required to pay tax on the money received? Receiving an inheritance as nominee or heir is not taxed as income in India. Life insurance death claims are generally exempt. Interest or capital gains earned after the death are taxed in the hands of the person who finally owns the asset. The deceased's final income-tax return must be filed by the legal representative. Sources: Ram Chander Talwar v. Devender Kumar Talwar (2010) (https://itatonline.org/digest/ram-chander-talwar-v-devender-kumar-talwar-2010-10-scc-671-159-comp-cas-646-manu-sc-0833-2010) ; IndiaCorpLaw on Shakti Yezdani (2023) (https://indiacorplaw.in/2024/01/03/unravelling-the-rights-of-successors-vis-a-vis-nominees-to-the-shares-of-a-company/) ; Trilegal on insurance nominees and Section 39 (https://www.mondaq.com/india/wills-intestacy-estate-planning/1642418/cracking-the-code-the-rights-of-nominees-of-insurance-policies-explained) ; RBI deceased-claims directions, 2025 (summary) (https://www.indialaw.in/blog/banking-and-finance/rbi-issues-directions-on-settlement-of-deceased-claims/) ; Post office death claim guidelines (https://news.cleartax.in/death-claim-settlement-guidelines-for-post-office-schemes/8864/amp/) . Worked examples are Money n Wealth illustrations. Do your nominations match your will? A 30-minute review of every account and policy usually finds at least one outdated nominee. Talk to Money n Wealth (/contact) for a free portfolio review, or see our estate planning service (/products/estate) . This article is for general educational purposes only and does not constitute financial or legal advice. Figures and examples are illustrative. Please consult a qualified financial adviser and a lawyer for guidance specific to your situation. Money n Wealth (Predics Fintech Services Pvt Ltd) is an AMFI-registered Mutual Fund Distributor (ARN-121995) and APMI-registered PMS Distributor (APRN07444); it is not a SEBI-registered investment adviser and may earn distribution commission on investments made through it. Insurance is the subject matter of solicitation.
Frequently Asked Questions
Can a nominee claim ownership of a bank account in India?
No. In Ram Chander Talwar v. Devender Kumar Talwar (2010), the Supreme Court held that a nominee under Section 45ZA of the Banking Regulation Act receives the depositor's rights over the account but does not become the owner. The bank pays the nominee and is discharged, but the money forms part of the estate and goes to the heirs under the will or succession law.
Who gets life insurance money, the nominee or the legal heir?
It depends on who the nominee is. Since the 2015 amendment, a spouse, parent or child named as nominee is a "beneficial nominee" under Section 39(7) of the Insurance Act and can generally keep the money. Any other nominee collects it for the legal heirs. High Courts have differed on the details, so naming the same person in your will adds certainty.
Does a will override a nomination?
For bank deposits, mutual funds and shares, yes in effect. The institution still pays the nominee, but the nominee holds the money for the person named in the will. For life insurance with a spouse, parent or child as beneficial nominee, the nomination may prevail. The cleanest plan names the same person in both places.
What if the nominee dies before the account holder?
The nomination for that person lapses. For mutual funds and demat accounts under SEBI's 2026 rules, the deceased nominee's share goes pro rata to surviving nominees; if none survive, heirs must claim. For bank accounts with successive nominees, the next nominee steps in. Update your nominations as soon as a nominee dies.
Can legal heirs challenge a nominee?
Yes. A legal heir or legatee can ask the nominee to hand over the money and, if refused, file a civil suit. They cannot usually stop the institution from paying the nominee unless they obtain a court order before payment. Most families settle the matter through a simple family settlement deed instead of litigation.
Is a nominee required to pay tax on the money received?
Receiving an inheritance as nominee or heir is not taxed as income in India. Life insurance death claims are generally exempt. Interest or capital gains earned after the death are taxed in the hands of the person who finally owns the asset. The deceased's final income-tax return must be filed by the legal representative.
Do your nominations match your will?
A 30-minute review of every account and policy usually finds at least one outdated nominee. Talk to Money n Wealth for a free portfolio review, or see our estate planning service .
