Nominee vs Legal Heir: Who Actually Gets the Money in India

In most cases the nominee is the person who receives the money, not the person who finally owns it. The Supreme Court has held repeatedly, starting with Sarbati Devi v. Usha Devi (decided in December 1983, reported in 1984) and most recently in Shakti Yezdani v. Jayanand Jayant Salgaonkar (December 2023), that a nomination is not a third way of inheriting property. The bank, insurer or company pays the nominee and is discharged, but the money belongs to the deceased person's estate and goes to the legal heirs under the will or, if there is no will, under the succession law that applies. The main exception is life insurance where the nominee is a parent, spouse or child.

Why nominations exist at all

Nomination solves a practical problem. When an account holder dies, the institution needs to know whom it can safely pay without waiting months for heirs to prove their rights in court. A valid nomination gives it that person. Paying the nominee protects the bank or company from claims that it paid the wrong person.

What nomination does not do is decide who inherits. Courts have read the nomination provisions in banking, insurance, company and savings laws as a convenience for the institution and the family, not as a substitute for a will. A nominee who is also an heir keeps only their own share. A nominee who is not an heir at all holds the money for those who are.

What the Supreme Court has decided

• Life insurance, Sarbati Devi v. Usha Devi: the Court held that section 39 of the Insurance Act, 1938 was not intended to act as a third mode of succession. Money paid to the nominee on the policyholder's death forms part of the estate and passes to the heirs.
• Bank deposits, Ram Chander Talwar v. Devender Kumar Talwar (2010): a son who was nominee on his mother's account claimed the whole amount against his brother. The Court rejected the claim. The nominee had the right to receive the money from the bank but did not become its owner.
• Government savings certificates: in Vishin N. Khanchandani v. Vidya Lachmandas Khanchandani the Court applied the same rule, as later noted in Shakti Yezdani.
• Shares and demat holdings, Shakti Yezdani v. Jayanand Jayant Salgaonkar (2023): even though the company law and depository nomination provisions use the word 'vest', the Court held that the nominee does not get absolute title. It upheld a Bombay High Court ruling that a bequest of shares in a valid will overrides the nomination.

Nomination process therefore does not override the succession laws.

Shakti Yezdani v. Jayanand Jayant Salgaonkar, Supreme Court (2023)

The bank deposit ruling put the point in plain terms. The Court said the Banking Regulation Act is in no way concerned with succession, and that all money a nominee receives under section 45ZA(2) forms part of the estate of the deceased depositor and devolves according to the rule of succession that governed the depositor. The same reasoning runs through every later case.

Bank accounts, fixed deposits and lockers

The nomination rules for banks changed on 1 November 2025, when amendments made by the Banking Laws (Amendment) Act, 2025 and the new Banking Companies (Nomination) Rules, 2025 came into force. The main changes for depositors are these.

• A deposit can have up to four nominees.
• For deposits, nominees can be simultaneous (each gets a fixed share) or successive (the next person in line takes only if the earlier nominee has died).
• For safe deposit lockers and articles kept in safe custody, only successive nomination of up to four individuals is allowed.
• Under the nomination directions the Reserve Bank issued to banks in October 2025, if one of several simultaneous nominees dies before receiving the money, the nomination fails only for that person's share, and the bank settles that share under the rules for accounts without a nominee.

A few rules in the 2025 Nomination Rules are worth knowing when you fill in or update a form.

• If a nominee is a minor, the depositor can appoint an adult to receive the money on the minor's behalf (rule 2(6)).
• For a joint deposit, a nomination can be cancelled or changed only by all the depositors together (rule 2(11)).
• Renewing a fixed deposit does not by itself cancel or change the nomination already registered on it (rule 2(14)).
• The bank must acknowledge a nomination, cancellation or change in writing or electronically (rule 2(12)). Keep that acknowledgement.

None of this changes the basic rule from Ram Chander Talwar. More nominees means the bank can pay faster and to more people. It does not mean those people own the money as against the other heirs. If you want to record or update nominations on a term deposit, a fixed deposit nomination form helps you give the bank complete details. For the claim process after a death, see our guide on claiming bank deposits after death.

Life insurance: when the nominee really does own the money

Parliament changed the insurance position through the Insurance Laws (Amendment) Act, 2015. Section 39(7) of the Insurance Act now says that where the holder of a policy on their own life nominates their parents, spouse, children, or spouse and children, the nominee or nominees are beneficially entitled to the amount payable. This is usually called a beneficial nominee.

• It applies to policies maturing for payment after the 2015 amendment came into force (section 39(10)).
• It does not apply if it is proved that the policyholder, given the nature of their title to the policy, could not have conferred such a beneficial title on the nominee.
• Creditors' rights to be paid out of the policy proceeds are not affected (section 39(9)).
• If a beneficial nominee survives the insured person but dies before the money is paid, that nominee's share goes to the nominee's own heirs (section 39(8)).
• Policies taken under section 6 of the Married Women's Property Act, 1874 for the benefit of a wife or children are outside section 39 and follow that Act instead.

If the nominee is anyone else, such as a brother, a friend or a business partner, the old rule from Sarbati Devi still applies. That nominee collects the claim and holds it for the policyholder's heirs or legatees.

Shares and demat accounts

Section 72 of the Companies Act, 2013 lets a shareholder nominate a person in whom the securities will vest on death, and the depository bye-laws have a similar provision. SEBI's mutual fund regulations use comparable wording for units. The appellants in Shakti Yezdani argued that this wording gave the nominees full ownership. The Supreme Court disagreed. It said the vesting is for a limited purpose, to make sure someone can deal with the securities and protect them until the legal representatives step in. The company or depository is protected when it transmits the securities to the nominee, but the heirs or the beneficiaries under a will can then claim them from the nominee.

Housing society flats

Co-operative housing societies also take nominations, usually for the share and membership tied to the flat. In Indrani Wahi v. Registrar of Co-operative Societies (2016), under the West Bengal law, the Supreme Court held that the society must transfer membership to a validly nominated person, but that this has no bearing on the question of title between the heirs. The other heirs remained free to pursue their claim to the flat.

Maharashtra's law now says this expressly for housing societies. Section 154B-13 of the Maharashtra Co-operative Societies Act, 1960 requires the society to admit the nominee as a provisional member after the member's death, until the legal heirs or the person entitled under the will are admitted. The Bombay High Court has applied this provision, holding that a registered nominee must be admitted only as a provisional member until the heirs or the person entitled under a will are admitted. Rules in other States differ, so check the State Act and the society's bye-laws.

Other nominations follow their own laws

Provident fund, public provident fund, gratuity, pension and some government schemes each have their own statute or scheme rules on nomination, and the result is not always the same as for bank deposits. Before assuming either way, read the specific law or ask the paying authority what it treats the nominee as.

How legal heirs actually get their share

In a family where everyone agrees, the process is mostly paperwork. The order below works for most deposits, policies and investments.

1. Work out who the legal heirs are. If there is a will, the beneficiaries named in it take. If there is none, the personal succession law applies; for Hindus, Buddhists, Jains and Sikhs that is the Hindu Succession Act, 1956.
2. Let the nominee lodge the claim with the bank, insurer or depository, with the death certificate, the nominee's KYC and the institution's claim form. This is usually the fastest route to get the money out.
3. Once paid, the nominee distributes the amount to the heirs in their shares and records it in writing. A nominee to heir transfer letter documents who received how much and why.
4. Heirs who agree to a particular distribution, or who are giving up their share, sign a no objection from legal heirs so the arrangement cannot be reopened later.
5. Where an institution or the family needs proof of who the heirs are, prepare a legal heir affidavit, and if required apply for a legal heir certificate or a succession certificate. Our guide on legal heir certificate versus succession certificate explains which one fits.

When a nominee refuses to share, the heirs usually file a civil suit for their share, sometimes with a claim for the administration of the estate. For an overview of the court route for succession certificates, see this guide to succession certificates, and to talk to someone about a contested case, you can find a wills and estates lawyer.

If you are the one making the nomination

Nomination and a will do different jobs, and most people need both. The nomination gets the money released quickly. The will decides who keeps it. If you want a particular person to inherit a deposit or a shareholding, say so in a valid will, because a nomination alone will not achieve it. Our guide on writing a valid will covers the formalities.

• Review nominations after marriage, divorce, the birth of a child or a death in the family. An outdated nomination is one of the commonest causes of family disputes over money.
• For life insurance, remember that naming a parent, spouse or child makes them a beneficial nominee who keeps the money. Naming anyone else does not.
• If the nominee is a minor, appoint a person to receive the money on the minor's behalf, which bank and insurance nomination forms allow.
• Keep a simple list of accounts, policies and investments with their nominees, so your heirs know where to claim. A general nomination form format can help you keep that record consistent.