Fixed Deposit Nominee vs Legal Heirs: Key Differences

Fixed deposits (FDs) are a popular investment choice for those seeking a safe and assured return on their money. When opening an FD account, investors often have to nominate a person who can claim the proceeds in the event of the investor’s demise. Understanding the roles and differences between a nominee and a legal heir in the context of fixed deposits is crucial, as this knowledge empowers you to make informed decisions about your investments.

Understanding Fixed Deposits

Before diving into the key differences between a nominee and a legal heir, let’s briefly touch on what fixed deposits are. FDs are investment instruments banks and financial institutions offer, and you deposit the complete amount for a fixed period at a predetermined rate of interest. At the end of the tenure, you receive the principal amount along with the accrued interest. Tools like the FD calculator and comparisons of FD rates are invaluable in helping investors make informed decisions.

Who is the Nominee?

A nominee is a person designated by the FD account holder to receive the proceeds of the FD in the unfortunate event of the account holder’s death. The nomination process is simple and is done at the time of opening the FD account. The nominee acts as a custodian of the funds but is not necessarily the rightful owner of the money.

Who are the Legal Heirs?

Legal heirs are individuals entitled to inherit the deceased’s assets based on the succession laws. The list of legal heirs can vary depending on the personal law applicable to the deceased. Still, it often includes the spouse, children, parents, or other close relatives. It’s important to understand that the legal heirs have a rightful claim to the deceased’s assets, including the fixed deposit amount. This knowledge empowers you to understand your rights and plan your financial future accordingly.

Comparing Nominees and Legal Heirs

Asset Ownership

A nominee does not become the owner of the fixed deposit amount. Legal heirs are the rightful owners of the fixed deposit amount.

Asset Transfer

Without legal formalities, nominees can claim and receive the fixed deposit amount from the bank. Legal heirs, however, may need to provide legal documents such as a death certificate, will, and probate order to claim and receive the fixed deposit amount.


Account holders can appoint any person as a nominee. Legal Heir is determined by the Laws of Succession, the deceased account holder cannot alter this.

Rights to Transfer

Nominees cannot transfer the fixed deposit amount to anyone else. Legal heirs have the right to transfer the fixed deposit amount to their own accounts or distribute it among themselves according to the Laws of Succession.

What If There Is No Will from the Account Owner?

Suppose the account holder did not leave behind official documents or a will before their tragic demise. In that case, their legal heirs can still access the funds. The distribution of assets, including bank accounts, will be governed by the Laws of Succession and passed on to the legal heirs.

The legal heirs of the deceased account holder will need to obtain a legal order from a court, such as a transfer order, to establish their entitlement to the assets, including bank accounts. Everyone should make a will and nominate beneficiaries for accounts, including FD accounts, to ensure a smooth asset transfer after their demise.

What If A Fixed Deposit Has A Nominee and A Legal Heir?

Suppose the account holder has appointed a nominee. In that case, the bank will transfer the fixed deposit amount to the nominee without needing a probate order or other legal formalities. The nominee is responsible for safeguarding the funds until a legal heir claims them. If none of the account holder’s relatives come forward to claim the money, the nominee can keep it.

The bank plays a crucial role in securing and transferring the FD amount to the legal heirs or the nominee of the deceased account holder according to the terms and conditions. Additionally, it verifies the identity of the claimants and ensures the transfer of funds in compliance with regulations.

Why Are Nominees and Legal Heirs Important?

Nominees are designated in fixed deposits and other investments primarily to ensure that the investor’s funds are swiftly transferred to a trusted individual. This designation also provides assurance that the nominee will facilitate the distribution of assets to all lawful heirs without complications.

In the absence of a named nominee, legal heirs must undergo the process of proving their relationship and obtaining a death certificate to access the funds. However, if a nominee is appointed, this entire process is circumvented, and the funds are transferred to the legal heirs by the nominee.

It is advisable for investors to clearly specify the legal heirs for all their investments, property, and assets in their wills. By specifying the legal heirs, proceeds from investments such as fixed deposits will be distributed to them through the nominee if one is appointed.

In the event that the investor or owner prepares a will, it is preferable to arrange for the dispersal of assets following their demise to prevent complications for the legal heirs, such as the requirement for multiple proofs, including a death certificate and evidence of relationship with the deceased.


Understanding the distinction between a nominee and legal heirs is crucial for effective estate planning and the smooth transition of assets. While a nominee ensures quick access to funds, legal heirs hold the ultimate right to inherit the FD proceeds. Utilising tools like an FD calculator and staying updated on FD rates can further enhance your investment strategy and financial planning.

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