You named a nominee for your investments. Can other heirs still claim a share?

We often come across words like nominee and legal heir when dealing with our bank accounts and investments. But do we really know what the difference is, and what it means for our money after we are gone?

Being named as a nominee does not necessarily mean you will inherit the money.

This can become an issue after someone dies. The nominee can approach the bank or financial institution and claim the money, but what happens after that? Does the money belong to the nominee, or can other legal heirs also claim a share?

The answer can be particularly important when a person dies without leaving a Will. A nominee may be able to receive the money from the institution, but that does not necessarily mean they have the final right to keep it.

A nomination does not determine who ultimately inherits a person’s assets after death. It enables the nominee to receive the assets from the bank or financial institution, while ownership is determined by the applicable law of succession. Accordingly, if you die without making a Will, your other legal heirs may claim their lawful shares in your bank accounts and investments, even if you have nominated only your spouse or one child. The nominee would receive the assets but would not, merely by nomination, become their exclusive owner.

This position was recognised by the Supreme Court of India in the case of Ram Chander Talwar v. Devender Kumar Talwar(2010) 10 SCC 671, where the Court held that a bank nominee receives the money but does not become its exclusive owner. The principle was reaffirmed in Shakti Yezdani v. Jayanand Jayant Salgaonkar (2024) 4 SCC 642, holding that nomination does not override succession rights

When the nominee approaches the institution after the depositor’s death, the institution may, upon submission of the death certificate, identity proof and other prescribed documents, release the investments to the registered nominee. This payment or transmission generally constitutes a valid discharge of the institution’s liability in respect of the deceased’s account or investment.

However, receipt of the money does not, by itself, make the nominee the absolute or beneficial owner of the assets. The nominee receives the assets in a representative capacity, subject to the rights of persons entitled to them under the applicable law of succession. Therefore, where the deceased died intestate, the nominee may be required to hold and distribute the assets in accordance with the lawful shares of the heirs. Accordingly, receiving the money does not make the nominee its legal or beneficial owner; the applicable law of succession determines ownership.

"If a mother dies without a Will, her daughter is entitled to the same share as her son. Her husband is also entitled to an equal share. If any of her children had died before her, the children or legal heirs of that deceased child can inherit the share their parent would have received had they been alive.

Similarly, if a father dies without a Will, his daughter is entitled to the same share as his son. His wife is also entitled to a share equal to that of a son or daughter. If a son or daughter had died before him, their children can inherit the share that their parent would have received if they had been alive," said Mumbai-based tax and investment expert Balwant Jain.

If you have specific wishes about who should inherit your investments, bank balances or other assets, relying on a nomination alone may not be enough. That is why making a clear, properly drafted Will can help avoid uncertainty and potential disputes among family members later.