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

In most cases the nominee receives the money and the legal heirs own it. A nomination on a bank account, a demat account, a mutual fund folio or a provident fund tells the institution whose hand to pay into so that the payment gives it a valid discharge, and the Supreme Court has held since Sarbati Devi v Usha Devi in 1983 that the nominee then holds the amount for whoever inherits under the law of succession. The nominee vs legal heir question has one genuine exception, life insurance, where the 2015 amendment to Section 39 of the Insurance Act, 1938 makes a spouse, child or parent named as nominee beneficially entitled, and even that exception is now contested between High Courts.

Part of the NRI succession and inheritance practice at S Jain & Attorneys, Bangalore.

This guide is for a family in which one member was named nominee on a deposit, a policy, shares, mutual funds, PF or PPF and either believes the asset is now theirs or is being asked by the other heirs to share it. It explains what each institution will pay and to whom, who owns the money once it is paid, who the legal heirs are under the Hindu Succession Act, 1956 and the Indian Succession Act, 1925, what papers the heirs need, and what a nominee who has already collected must do. It does not cover immovable property, which has no nomination system at all, and it does not repeat the procedure for a succession certificate, which is in a separate guide linked below.

Is a nominee the owner of the money after death?

No, outside the insurance exception discussed below, a nominee is a receiver and not an owner. The Supreme Court settled this in Sarbati Devi v Usha Devi, decided on 6 December 1983. A man governed by the Hindu Succession Act died intestate leaving his widow, his mother and his minor son, and he had nominated the widow under Section 39 of the Insurance Act on two life policies. The widow claimed the whole sum as nominee. The Court held that a mere nomination "does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death of the assured", that the nomination "only indicates the hand which is authorised to receive the amount, on the payment of which the insurer gets a valid discharge", and that the amount "can be claimed by the heirs of the assured in accordance with the law of succession governing them". Each of the three heirs was declared entitled to one third.

The Court also rejected the idea, floated by the Delhi High Court, that a nomination is a "statutory testament" or a third mode of succession sitting beside a will and intestacy. The reason is structural. A will diverts an estate from the ordinary course of succession, so the law surrounds it with safeguards: under Section 63 of the Indian Succession Act, 1925 the testator must sign and two witnesses must attest. A nomination is a line on an account opening form, changeable at any time, and it would be strange if a form could do what a will can only do with two attesting witnesses.

Forty years later the Supreme Court confirmed that this is the rule across the nomination statutes it reviewed. In Shakti Yezdani v Jayanand Jayant Salgaonkar, decided on 14 December 2023, it reviewed the cases on the Government Savings Certificates Act, the Banking Regulation Act, the Insurance Act and the Employees' Provident Funds Act and recorded that "a consistent view appears to have been taken by the courts", that a nomination "would not lead to the nominee attaining absolute title over the subject property", and that "the legal heirs therefore have not been excluded by virtue of nomination". The Court put the distinction in one line: offering a discharge to the institution once the nominee is in the picture "is quite distinct from granting ownership of securities to nominees instead of the legal heirs".

Key takeaway. A nomination answers the institution's question, whom do we pay. Succession law answers the family's question, who keeps it. The two questions have different answers unless the asset is a life policy with a spouse, child or parent as nominee.

The three propositions below run through every asset class discussed in this guide.

Who gets a bank deposit when there is a nominee?

The bank pays the nominee, and the nominee holds the money for the heirs. Section 45ZA of the Banking Regulation Act, 1949 lets a depositor nominate a person "to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the banking company". Sub-section (2) is drafted in strong words: notwithstanding any other law or any testamentary disposition, the nominee becomes entitled to all the rights of the depositor in relation to the deposit "to the exclusion of all other persons". Sub-section (4) says payment in accordance with the section "shall constitute a full discharge to the banking company", and then adds the proviso that matters to families: nothing in it "shall affect the right or claim which any person may have against the person to whom any payment is made under this section".

That proviso is why the strong words in sub-section (2) do not make the nominee the owner. In Ram Chander Talwar v Devender Kumar Talwar, decided on 6 October 2010, a son who was nominee on his late mother's account claimed the balance and the locker contents against his own brother. The Supreme Court called the argument "quite fallacious". Section 45ZA(2) "merely puts the nominee in the shoes of the depositor after his death and clothes him with the exclusive right to receive the money lying in the account", but "by no stretch of imagination makes the nominee the owner of the money". The Banking Regulation Act "is in no way concerned with the question of succession", so all the money the nominee receives forms part of the estate of the deceased depositor and must "devolve according to the rule of succession to which the depositor may be governed". The same logic covers a fixed deposit, a savings balance and, through Section 45ZE, the contents of a locker, where the nominee is given access and liberty to remove the contents, not title to them.

One recent change needs a sentence. The Banking Laws (Amendment) Act, 2025, enacted in April 2025 and brought into force on dates notified by the Central Government, rewrites Section 45ZA(1) to allow up to four nominees, either successively or simultaneously with stated percentage shares, inserts a new Section 45ZG fixing the order of priority among successive nominees, and allows up to four successive nominees for a locker. It changes how many hands the bank may pay into. It does not touch the proviso to sub-section (4) or the Talwar principle, so the heirs' claim against each nominee survives.

When is an insurance nominee the actual owner?

A life insurance nominee who is the policyholder's spouse, child or parent is, on the words of the amended statute, beneficially entitled to the policy money, and every other insurance nominee is only a collector. Sarbati Devi was decided on the original Section 39, under which a nomination could be made in favour of anyone and could be "cancelled or changed by an endorsement or a further endorsement or a will". The Insurance Laws (Amendment) Act, 2015 added new sub-sections on the recommendation of the Law Commission, which had drawn a line between a "beneficiary nominee" and a "collector nominee". The amended Section 39(7), as reproduced by the Allahabad High Court in Kusum v Anand Kumar on 30 April 2025, says that where the holder of a policy on his own life "nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer", unless it is proved that the holder, having regard to the nature of his title to the policy, could not have conferred that beneficial title. Section 39(8) sends the share of such a nominee who dies after the insured but before payment to the nominee's own heirs rather than the policyholder's. Section 39(9) preserves the right of any creditor to be paid out of the proceeds, and Section 39(10) applies the new rules to all policies maturing for payment after the amendment came into force, which for a death claim means a death after that date.

A brother, sister, friend or employer named as nominee gets nothing from the amendment. For them Sarbati Devi applies in full: they collect, and they hold for the heirs or for the legatees under the will. And whoever the nominee is, the insurer must first admit the claim. If it repudiates, the remedies are in our guide on a life insurance claim rejected over KYC.

Even for the family nominee the position is not settled, and anyone advising a family should say so. The Andhra Pradesh High Court in Mallela Manimala v Mallela Lakshmi Padmavathi, decided on 15 March 2023, held that a wife named as beneficial nominee on her late husband's policies took the entire sum to the exclusion of his mother, because the insured died after the amendment and the policies matured on his death. The Delhi High Court in Shweta Singh Huria v Santosh Huria, decided on 18 May 2021, set aside a decree that had given a mother a one-fourth share without considering the amendment and sent the case back to be decided under the amended section. The Allahabad High Court in Kusum v Anand Kumar took the opposite view. A mother who was nominee on her late daughter's policies claimed the money as beneficial nominee against the succession rights of her minor granddaughter. The court held that the Hindu Succession Act is the specific statute on succession and the Insurance Act a general one, that Section 39(7) is in pari materia with Section 45ZA(2) as read in Talwar and must be read the same way, and that "the beneficial nominee cannot be said to be the owner of the money out of the proceeds of policy". Because different High Courts had taken different views, the judge granted a certificate of appeal to the Supreme Court under Article 134A of the Constitution. Until the Supreme Court decides, a spouse-nominee has the statute on her side, a parent-nominee against the deceased's own children has the most exposed claim, and an insurer will in practice pay the registered nominee and leave the family to sort out ownership.

Common mistake. Assuming that the 2015 amendment made every insurance nominee an owner. It covers only a spouse, children or parents, only policies maturing after it came into force, and one High Court has already read it down in favour of the heirs.

Do shares, mutual funds, PF and PPF nominees become owners?

No for shares and mutual funds, no in substance for provident fund, and for PPF and post office savings only if the depositor recorded the nominee as an owner. Section 72 of the Companies Act, 2013 lets every holder of securities nominate a person "to whom his securities shall vest in the event of his death", and sub-section (3) uses the same non-obstante and "to the exclusion of all other persons" language as the banking provision. In Shakti Yezdani the nominees of fixed deposits and mutual fund investments argued that the word "vest", the exclusion clause and the non-obstante clause together made the Companies Act a complete code in itself, so that the securities passed to them absolutely and the law of succession never reached them. The Supreme Court held that the three elements "have not persuaded us", that "vest" carries a variety of meanings depending on context, and that the vesting under Section 109A of the 1956 Act and Section 72 of the 2013 Act "is for a limited purpose", to make sure there is no confusion about the formalities on the holder's death and to protect the securities from protracted litigation "until the legal representatives of the deceased holder are able to take appropriate steps". The nominee, as the Bombay High Court had put it in the ruling the Supreme Court affirmed, holds in a fiduciary capacity and is answerable to claims under succession law. The same conclusion was applied to the depository bye-laws that govern demat holdings, and the Bombay High Court decision the Supreme Court upheld had also held that a will executed under the Indian Succession Act supersedes a share nomination.

Provident fund works differently on paper and the same in result. Section 10(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 says the amount payable to a nominee under the Scheme vests in the nominee and is free from any debt incurred by the deceased or the nominee before the death. But paragraph 61(3) of the Employees' Provident Funds Scheme, 1952 confines the choice: if the member has a family, the nomination "shall be in favour of one or more persons belonging to his family", any nomination in favour of an outsider "shall be invalid", and a nomination made before marriage lapses on marriage. Paragraph 70 sends the accumulations, where no valid nomination subsists, to the members of the family in equal shares, subject to exclusions for adult sons and married daughters with living husbands where other family members exist, and otherwise to "the person legally entitled to it". The Supreme Court in Shakti Yezdani recorded the Bombay High Court's view that the Sarbati Devi principle applies to provident fund nominations as well. In practice the money reaches the family in any event, and the shares between family members are decided by succession law.

PPF and post office savings are the one place where the depositor chooses. Section 4(1) of the Government Savings Promotion Act, 1873, as amended by the Finance Act, 2018, lets the depositor designate nominees entitled "to receive the sum due, as an owner or a trustee, and to the extent, as may be specified by the depositor at the time of making nomination", and the account opening form under the Public Provident Fund Scheme, 2019 carries columns for the share of entitlement and the nature of entitlement, with the choice "Trustee or owner". Where the form says trustee, or says nothing, the older Supreme Court line on savings certificates, summarised in Shakti Yezdani, applies: the nominee may receive the sum but "cannot utilise it" and may retain it only "for those entitled to it under the relevant law of succession". Section 5 of the 1873 Act makes payment to the nominee a full discharge and in the same breath preserves the right of the executor, administrator or other representative to recover from the recipient "the amount remaining in his hands after deducting the amount of all debts or other demands lawfully paid".

Deadline warning. Under Section 4A(4) of the Government Savings Promotion Act, 1873, the Act that also frames PPF, if a depositor dies without a nomination and no probate, letters of administration or succession certificate is produced within three months of the death, the post office may pay a deposit below the prescribed limit to any person who appears to it to be entitled. Heirs of a small post office account who want the money paid to them and not to whoever applies first should file within that window.

Who are the legal heirs who actually own the money?

For a Hindu, Buddhist, Jain or Sikh man dying without a will, Section 8 of the Hindu Succession Act, 1956 gives the property first to the Class I heirs in the Schedule: the son, daughter, widow and mother, together with the children and widow of a predeceased son, the children of a predeceased daughter, and the listed grandchildren of predeceased children. Section 9 says the Class I heirs "take simultaneously and to the exclusion of all other heirs", and Section 10 fixes the shares: the widow takes one share, each surviving son, daughter and the mother takes one share, and the branch of each predeceased child takes one share between them. That is why the widow in Sarbati Devi, who was the nominee, kept only a third: the mother and the son were Class I heirs with equal shares. Only if there is no Class I heir does the estate go to Class II, whose first entry is the father, and then to agnates and cognates. The widow's position in more detail is in our guide on succession after the death of a spouse.

For a Hindu woman dying without a will, Section 15(1) sends the property first to her sons and daughters, including the children of a predeceased child, and her husband, then to the heirs of the husband, then to her mother and father, then to the heirs of the father and lastly to the heirs of the mother. Section 15(2) contains the rule families forget: if she leaves no children, property she inherited from her father or mother goes back to the heirs of the father rather than to her husband's side, and property she inherited from her husband or father-in-law goes to the heirs of the husband. Under Section 14 whatever she held was her absolute property, so a nomination she made on her own account is tested against these rules and not against any notion of a limited estate.

Christians, Parsis and others outside the Hindu and Muslim systems, and by Section 5 of the Hindu Succession Act persons whose succession is governed by the Indian Succession Act because they married under the Special Marriage Act, are governed by Part V of the Indian Succession Act, 1925, which Section 29 says does not apply to Hindus, Muslims, Buddhists, Sikhs or Jains. Section 32 devolves the property on the spouse and the kindred in the order set out in that Part, and Section 33 gives a widow one third where there are lineal descendants, one half where there are only kindred, and the whole where there are neither, with separate rules for Parsis in Chapter 3 of the same Part. Muslims are governed by their personal law of inheritance, which fixes shares by relationship and sits outside both Acts, and the nomination cases apply to them in the same way: the nominee collects, and the heirs under personal law own.

A will overrides all of this. Section 30 of the Hindu Succession Act allows any Hindu to dispose of property by will in accordance with the Indian Succession Act, Section 59 of that Act allows every person of sound mind who is not a minor to make one, and Section 63 requires the testator's signature and two attesting witnesses, a procedure set out in our guide on how to make a will in India. A will also beats a nomination. Section 39(2) of the Insurance Act itself says a nomination may be cancelled or changed "by a will", and the Bombay High Court ruling upheld in Shakti Yezdani held that a bequest of shares in a valid will supersedes the nomination. Since Section 213 of the Indian Succession Act was omitted in 2025, probate is no longer a precondition to enforcing a will, a change explained in our guide on why probate is no longer mandatory. The order of precedence is therefore the will first, intestate succession if there is no will, and the nomination only as the route by which the money is collected, save for the insurance exception.

What paperwork do the heirs need to get the money?

The heirs need a death certificate, a written statement from each institution of what was paid to whom, and then one of three things: the nominee's cooperation, a legal heir or succession certificate where there is no nominee, or a suit where the nominee refuses. The sequence below is the practical order.

1. Obtain several certified copies of the death certificate. Every institution keeps one.
2. List every asset and write to each bank, insurer, depository participant, fund house, the EPFO and the post office asking for the balance on the date of death, whether a nomination is registered, in whose favour, and whether any payment has been made. The reply fixes the figures for everything that follows.
3. Where a nomination exists, expect the institution to pay the nominee on the death certificate and the nominee's KYC. The payment gives the institution a statutory discharge, so the heirs' claim runs against the nominee unless a civil court has restrained the payment in a pending suit.
4. Where there is no nomination, obtain a legal heir certificate from the revenue authority for identifying the heirs and for small balances, and a succession certificate under Part X of the Indian Succession Act for debts and securities, because Section 214 bars a court from decreeing a debt of the deceased in favour of an heir who does not produce a succession certificate, probate or letters of administration. Which institutions accept which document is in our guide on succession certificate, legal heir certificate or probate.
5. Where there is a will, the executor collects. Probate is no longer mandatory, but an institution facing a disputed will may still ask for probate or letters of administration before it pays.
6. Send the nominee a written demand for the heirs' shares with a statement of what was received, and propose a family settlement recording the shares.
7. If the nominee refuses, file a civil suit for declaration, accounts and recovery of the heirs' shares. The suit is against the nominee, and the institution is at most a formal party.

In practice the argument in these families is rarely about the law, which outside insurance is settled, but about proof. The heirs often do not know which accounts existed, the nominee often does not know that a duty to account exists, and by the time the two sides meet the money has been mixed with the nominee's own funds or spent on the funeral, the debts and the household. The single most useful step, before any lawyer's notice, is the written enquiry to each institution in step two, because it produces a dated figure that neither side can later dispute. The second is to separate the question of the deceased's debts, which the estate must pay before anyone takes a share, from the question of who takes the balance. Families who settle these two points on paper usually do not need the court, and those who cannot are better served by a wills, probate and succession practice that pleads the accounts precisely than by a notice that simply demands the money back.

What must a nominee who has received the money do?

A nominee who has collected must keep the money identifiable, account for it, and hand over the heirs' shares after the estate's lawful debts are paid. The Supreme Court in Shakti Yezdani recorded that the nominee holds in a fiduciary capacity and remains answerable to claims under succession law. The proviso to Section 45ZA(4) of the Banking Regulation Act preserves every claim against the person the bank paid, and Section 5 of the Government Savings Promotion Act allows the executor or administrator to recover from the recipient what remains after the debts are met. A nominee who spends the money on personal purposes and cannot account for it faces a suit for the heirs' shares. What a collector nominee is not is a debtor of the deceased's creditors beyond what was received: Section 10(2) of the Employees' Provident Funds Act keeps provident fund money free of the debts of both the deceased and the nominee, while Section 39(9) of the Insurance Act, in the opposite direction, keeps a creditor's right against policy proceeds alive even against a beneficial nominee.

Where the heirs agree that the nominee should keep the asset, the agreement should be written. A release or relinquishment by the other heirs, or a family settlement recording who takes what, ends the fiduciary duty and gives the nominee a title the bank or company will respect. Stamp duty on such documents depends on the State and on whether immovable property is included, so the cost should be checked before signing. Without a written release the heirs' claim stays alive, and the nominee's position is only that of a holder.

The rules a collector nominee lives by are short.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

For a contested nomination, a succession certificate or a will, see our wills, probate and succession practice, and for heirs abroad our NRI succession and inheritance page.

• Succession Certificate, Legal Heir Certificate or Probate: Which One Do You Need?
• Probate Is No Longer Mandatory in India: What Changed in December 2025
• How to Get a Succession Certificate in India
• How to Make a Will in India: A Practical Guide
• Succession After Death of Spouse in India: A Guide
• Life Insurance Claim Rejected Over KYC: Your Rights
• How an NRI Should Make a Will for Indian Assets