Nominee vs Legal Heir: Who Gets the Bank Balance, Shares, Insurance and EPF
A nominee collects the money; the legal heirs own it. That rule holds for bank deposits, shares and mutual funds, where the Supreme Court has said nominees hold the proceeds for the heirs. Life insurance is the exception. Since the 2015 amendment, a spouse, child or parent named as nominee keeps the payout as its owner, unless the policy could not confer that benefit.
Key takeaways
- Bank deposits: since 1 November 2025 you can name up to four nominees, successively or simultaneously with set percentages. The nominee still holds the money for the heirs.
- Shares, demat and mutual funds: Shakti Yezdani (December 2023) settled that nomination is not a way of inheriting. From 1 September 2026 SEBI allows up to three nominees, down from ten.
- Life insurance: a spouse, child or parent named under section 39 of the Insurance Act is a beneficial nominee and keeps the money. Anyone else is a collector for the heirs.
- EPF: without a valid nomination, the balance goes to the member's family in equal shares under paragraph 70.
- With no nominee, banks settle claims up to Rs 15 lakh (Rs 5 lakh at co-operative banks) on a simplified set of papers, within 15 days.
Why the law separates the two
Nomination tells the institution whom to pay. Inheritance decides who is entitled. The first follows banking, company, SEBI or EPF rules; the second follows a will or succession law.
Paying the nominee discharges the payer. Whether the nominee may keep the money depends on the second set of rules.
| Asset | Nominees allowed | Does the nominee own it? | Payout with no nominee |
|---|---|---|---|
| Bank deposits | Up to 4, successive or simultaneous (from 1 Nov 2025) | No: holds for heirs (s.45ZA; Ram Chander Talwar, 2010) | Simplified papers up to Rs 15 lakh (commercial banks) or Rs 5 lakh (co-operative banks) |
| Demat and mutual funds | Up to 3 from 1 Sep 2026 (was 10 from March 2025) | No (Shakti Yezdani, 2023) | Simplified papers up to Rs 15 lakh per demat account, Rs 5 lakh per issuer for physical shares |
| Life insurance | One or more | Yes, if spouse, child or parent (s.39(7)); otherwise a collector | Usually a succession certificate or equivalent |
| EPF, EPS, EDLI | Family members, via Form 2 | Paid to the nominated family members in the stated shares | Family members in equal shares (para 70) |
Bank deposits: up to four nominees, still not owners
The Banking Laws (Amendment) Act, 2025 changed section 45ZA of the Banking Regulation Act from "one person" to up to four persons, "either successively or simultaneously," with the rules in force from 1 November 2025.
- Successive: only one nominee is recognised at a time, in the order you set. If the first has died, the second is paid.
- Simultaneous: up to four nominees, each with a percentage adding up to 100%. If one dies before being paid, that share is treated as having no nomination.
None of this makes the nominee the owner. In Ram Chander Talwar v. Devender Kumar Talwar (6 October 2010), a son named as nominee on his mother's account claimed all of it against his brother. The Supreme Court held that section 45ZA(2) puts the nominee in the depositor's shoes to receive the money, and nothing more. Distribution follows succession law.
No nominee: the RBI's 2025 claim directions
The RBI's directions on settling claims of deceased customers, to be in place by 31 March 2026, set a simplified procedure where there is no nominee or survivor. Up to Rs 15 lakh at a commercial bank, or Rs 5 lakh at a co-operative bank, the heirs give a claim form signed by all claimants, the death certificate, identity proof, an indemnity bond, a no-objection letter from any heir not claiming, and either a legal heir certificate or an independent person's declaration on who the heirs are. The bank cannot ask for a third-party surety and must settle within 15 calendar days of a complete file, paying interest for delays it causes. Our guide to the legal heir certificate covers getting that document state by state.
Shares, demat and mutual funds
In Shakti Yezdani v. Jayanand Jayant Salgaonkar (14 December 2023), the testator had named nominees on fixed deposits and mutual funds, and they argued nomination under the Companies Act and the Depositories Act made them owners. The Supreme Court disagreed: nomination is not a third mode of succession, and nominees hold the securities for the heirs or the will's beneficiaries.
SEBI's own rules have moved twice. A circular of 10 January 2025 allowed up to ten nominees from 1 March 2025. A circular of 29 May 2026, effective 1 September 2026, cuts that to three, drops the witness requirement and makes nomination the default for new single-holder accounts unless the investor opts out. Joint accounts stay optional. If you named more than three under the 2025 rules, ask your depository participant or fund house how your existing nomination will be treated.
Without a nominee, the heirs apply for transmission. SEBI's simplified documents apply up to Rs 5 lakh per issuer for physical shares and Rs 15 lakh per demat account, and a legal heirship certificate from a competent government authority is accepted. SEBI has proposed raising the limits to Rs 10 lakh and Rs 30 lakh.
Life insurance: the beneficial nominee
Section 39 of the Insurance Act, as amended with effect from 26 December 2014, splits nominees in two.
- Beneficial nominee: a parent, spouse or child, or any of them. They are beneficially entitled to the money, so the heirs cannot claim it from them, unless it is proved that the policyholder could not have conferred that title (section 39(7)).
- Collector nominee: anyone else, such as a brother or friend. They receive the payout and must pass it to the beneficiaries or the legal heirs.
A policy taken under section 6 of the Married Women's Property Act goes further: it is held in trust for the wife and children, outside the estate and out of creditors' reach. It must be chosen at purchase.
Worked example: one Rs 1 crore term policy, two nominations
A Hindu man dies without a will, leaving a widow, two children and a Rs 1 crore term policy. His mother died earlier.
- Widow named as nominee: she is a beneficial nominee and keeps the full Rs 1 crore.
- His brother named as nominee: the brother is a collector. The Class I heirs are the widow and two children, so each is entitled to a third: Rs 1,00,00,000 / 3 = about Rs 33.33 lakh.
The same family's Rs 12 lakh fixed deposit, with the widow as nominee, is paid to her in full. But she holds it for all three heirs, so each is entitled to Rs 4 lakh.
EPF, EPS and EDLI
One nomination on Form 2 covers the provident fund, the pension scheme and the EDLI insurance. A member with a family can nominate only family members. A member without one can nominate anyone, but that nomination lapses once the member acquires a family, which is why a nomination made before marriage has to be redone after it.
Where no valid nomination exists, paragraph 70 of the EPF Scheme, 1952 pays the amount to the members of the family in equal shares. For a male member, the family includes his wife, children, dependent parents, and a deceased son's widow and children.
Flats, home-loan cover and wills
A society nomination on a flat lets the society deal with the nominee; ownership still follows the will or succession law. For the loan cover on a flat, see the section on joint loans and nominee confusion in our guide to home loan insurance. The simplest way to make nominee and heir the same person is a will; our comparison of a gift deed and a will is a starting point.
Where families go wrong
- Treating the nominee as the heir. A sole bank nominee can be sued by siblings for their shares.
- Collector nominees on insurance. Naming a sibling instead of a spouse or child can hand the payout to the full set of heirs rather than the person you meant.
- Nominations that fight the will. For bank deposits and securities, the will or succession law decides ownership, not the nomination, so line them up.
For the inheritance side, see our guide to women's property rights.
Frequently asked questions
Can legal heirs claim money from a bank nominee?
Yes. The bank pays the nominee and is discharged, but in Ram Chander Talwar (2010) the Supreme Court held that section 45ZA only lets the nominee receive the deposit, not own it. The money is divided by the will or by succession law. An heir who is refused a share by the nominee can sue for it, and the nominee has to account for what was received.
How many nominees can I have on a bank account now?
Up to four, since 1 November 2025, under the Banking Laws (Amendment) Act, 2025. You choose successive nomination, where one nominee is recognised at a time in your order of priority, or simultaneous nomination, where up to four people each get a fixed percentage totalling 100%. If a simultaneous nominee dies first, that share is treated as having no nomination.
Does an insurance nominee have to share the claim with other heirs?
It depends on who the nominee is. Under section 39 of the Insurance Act, a spouse, child or parent named as nominee is a beneficial nominee and keeps the money. Anyone else, such as a brother or friend, is a collector nominee who must pass the claim to the legal heirs. A Married Women's Property Act policy is held in trust for the wife and children.
What happens to shares and mutual funds if there is no nominee?
The heirs apply for transmission. SEBI's simplified documents apply up to Rs 15 lakh per demat account and Rs 5 lakh per issuer for physical shares, and a legal heirship certificate issued by a competent government authority is accepted. Above those limits, expect to produce a succession certificate, probate or similar court document. SEBI has proposed raising both limits.
Who gets the EPF balance if there is no nomination?
Under paragraph 70 of the EPF Scheme, 1952, the balance is paid to the member's family in equal shares. For a male member that means his wife, children, dependent parents, and a deceased son's widow and children. A nomination made before marriage becomes invalid on marriage, so check Form 2 after any change in the family.
If an inheritance includes a flat or land as well as money, Realty Hunting can help you understand what the property is worth and what a sale by several heirs involves.
