In India, the distinction between a nominee and a will is crucial when it comes to the distribution of assets after someone's demise. This understanding becomes even more significant considering the staggering amount of unclaimed deposits lying in Indian banks. As of March 2024, unclaimed deposits in Indian banks have surged by 26% year-on-year, reaching ₹78,213 crore. This article delves into the differences between nominees and wills, the current state of unclaimed deposits, and the procedures to claim these funds.
Nominee vs. Will: What's the Difference?
Nominee:
A nominee is an individual appointed by the account holder to receive the proceeds of financial assets upon the account holder's death. However, it's essential to understand that a nominee acts as a trustee or caretaker of the assets, holding them until the legal heirs claim them. The nominee does not automatically become the owner of the assets unless they are also the legal heir.
Will:
A will is a legal document wherein an individual specifies how their assets should be distributed after their death. It outlines the beneficiaries and the proportion of assets each should receive. In the presence of a valid will, the distribution of assets follows the directives mentioned therein, overriding the nomination if there's a conflict.
Key Differences:
Purpose: A nominee ensures the immediate transfer of assets to a trusted individual, while a will provides a comprehensive plan for asset distribution.
Legal Standing: A will holds more legal weight in determining asset distribution, especially if there's a dispute.
Beneficiaries: Nominees may not necessarily be the legal heirs, whereas a will explicitly names the beneficiaries.
The Growing Concern of Unclaimed Deposits
The Reserve Bank of India's (RBI) Annual Report reveals a concerning rise in unclaimed deposits. As of March 2024, these deposits have reached ₹78,213 crore, marking a 26% increase from the previous year . These funds accumulate due to various reasons:
Lack of Awareness: Many individuals are unaware of dormant accounts or forget about fixed deposits.
Absence of Nomination: Accounts without nominees complicate the claim process after the account holder's death.
Legal Complications: In cases where there's no will, legal heirs must undergo lengthy procedures to claim assets.
Migration: People moving cities or countries may lose track of their accounts.
How to Claim Unclaimed Deposits
1. Utilizing the UDGAM Portal:
The RBI has launched the Unclaimed Deposits – Gateway to Access Information (UDGAM) portal, enabling individuals to search for unclaimed deposits across multiple banks. As of October 2023, 30 banks have been onboarded, covering around 90% of such unclaimed deposits.
Steps:
Visit the UDGAM portal.
Enter the required details, such as name and PAN.
Review the search results to identify any unclaimed deposits.
2. Claiming Through Nomination:
If you're a nominee, the process is relatively straightforward:
Submit a claim form to the respective bank branch.
Provide necessary documents, including the death certificate of the account holder and your identification proof.
The bank will verify the details and release the funds accordingly.
3. Claiming Without Nomination:
In the absence of a nominee, legal heirs must follow a more elaborate process:
For Claims Up to ₹5 Lakh:
Submit an affidavit affirming your relationship with the deceased.
Provide identity proofs and the death certificate.
Banks may also require a no-objection certificate from other legal heirs.
For Claims Above ₹5 Lakh:
Obtain a succession certificate from the court, which can be time-consuming and costly.
Submit the certificate along with other necessary documents to the bank.
It's worth noting that some banks may accept indemnity bonds and affidavits for smaller amounts, but this varies by institution.
Preventive Measures: Ensuring Smooth Asset Transfer
To avoid complications for your loved ones:
Regularly Update Nominations: Ensure all your financial accounts have up-to-date nominee details.
Draft a Comprehensive Will: Clearly outline the distribution of your assets to prevent disputes.
Maintain Records: Keep a record of all your financial accounts and share the details with trusted family members.
Stay Informed: Periodically check for any dormant accounts or unclaimed deposits using tools like the UDGAM portal.
Conclusion
Understanding the roles of nominees and wills is vital in ensuring that your assets are distributed according to your wishes. With the significant rise in unclaimed deposits in Indian banks, it's imperative to take proactive steps to secure your financial legacy. By staying informed and organized, you can provide peace of mind to yourself and your loved ones.