When someone dies, a bank, insurance company, mutual fund, or demat account often pays out to whoever is named as 'nominee.' Indian courts have repeatedly held that a nominee is usually only a trustee -- someone authorised to collect the money -- and not automatically its legal owner. Who actually owns the money is decided separately, by the deceased's Will or by succession law. There is one real, narrow exception for certain life insurance nominees.
1. Identify exactly which type of asset is involved, because the nomination law is different for each one.
Bank deposits and lockers are governed by the Banking Regulation Act, 1949 (ss.45ZA-45ZF) and RBI's Directions on settlement of deceased customers' claims. Life insurance is governed by s.39 of the Insurance Act, 1938. Shares, demat holdings and mutual fund folios are governed by s.72 of the Companies Act, 2013 and SEBI's nomination framework. Employees' Provident Fund follows its own EPF Scheme rules. The real legal effect of 'nominee' differs across these, so confirm which one applies before assuming a general rule.
2. Check whether the one real exception -- a 'beneficial nominee' under a life insurance policy -- applies.
Section 39(7) of the Insurance Act (inserted by the 2015 amendment) says that where the nominee is the policyholder's parent, spouse, child, or spouse and children, that nominee is 'beneficially entitled' to the payout -- i.e. they genuinely own it, not just collect it -- unless it is shown the policyholder could not have conferred that title. For every other nominee (a sibling, friend, or anyone outside this list), s.39(8) makes clear the older rule survives: the nominee only holds the money in trust for the real legal heirs.
3. For every other asset type -- bank deposits, shares, mutual funds, EPF -- the nominee is legally only a trustee, confirmed by the Supreme Court.
In Sarbati Devi v. Usha Devi (1984) the Supreme Court held an insurance nominee (outside the 2015 beneficial-nominee exception) is a mere trustee, not a legatee. In Shakti Yezdani v. Jayanand Salgaonkar (2023 INSC 1076) the Court extended this squarely to shares and mutual funds, holding that nomination under the Companies Act and Depositories Act does not override succession law and does not create a third, independent mode of inheritance. Bank nomination rules and EPF nomination rules are understood the same way -- the bank/EPFO's payment to the nominee discharges its own liability, but does not settle who owns the money afterward.
4. Find out whether the deceased left a valid Will.
If there is a Will, the assets pass to whoever it names (the executor administers the estate), not according to intestate succession law and not to the nominee (unless the Will and the nomination happen to name the same person). A Will may need to be probated in some cases -- check with the bank/company what proof of the Will they will accept.
5. If there is no Will, identify the correct succession law based on the deceased's religion or personal law.
Hindus, Buddhists, Sikhs and Jains follow the Hindu Succession Act, 1956. Christians and Parsis, and cases where no specific personal law applies, generally follow Part V of the Indian Succession Act, 1925. Muslims follow their own uncodified personal law (Sunni/Shia rules of inheritance). This determines who the real legal heirs are and in what shares -- a fact the nomination itself has no power to change.
6. For smaller amounts, use each institution's own simplified settlement procedure instead of going to court.
The Reserve Bank of India (Settlement of Claims in respect of Deceased Customers of Banks) Directions, 2025 fix a simplified-settlement threshold -- Rs.15 lakh for commercial banks and Rs.5 lakh for co-operative banks -- below which a bank must settle a claim without insisting on a succession certificate, provided there's no nominee/survivorship clause already covering it. Within this threshold, a legal heir certificate/affidavit, an indemnity bond, and a no-objection letter from other heirs is usually enough, and the bank must settle within 15 calendar days of receiving complete documents.
7. For larger amounts, or where heirs genuinely disagree, apply for a Succession Certificate from the civil court.
Under s.372 of the Indian Succession Act, 1925, a District Judge (in the district where the deceased ordinarily resided, or where any property is found) can issue a Succession Certificate authorising the holder to collect the deceased's debts and securities -- bank deposits, shares, bonds. Under s.381, the certificate gives full legal protection to whoever pays against it, which is exactly why banks/companies/insurers require it once an amount is disputed or exceeds their own simplified-settlement threshold. This is a separate, court fee-bearing process from the faster, revenue-authority-issued Legal Heir Certificate, which only identifies heirs and does not by itself authorise collecting money.
8. If a nominee who already received the money refuses to share it with the other legal heirs, pursue it directly.
A Succession Certificate holder, or an heir under a probated Will, can demand their share directly from the nominee. If refused, a civil suit for recovery of money/rendition of accounts against the nominee is the usual route (in a genuine family dispute over shares, a partition suit may also be appropriate). Act without unnecessary delay -- see the time-limit note below.
9. Where all heirs agree on their shares, a private family settlement can avoid court altogether.
A notarised (and, for immovable property or where the value requires it, registered) family settlement recording how the money/asset will be divided is commonly accepted by banks and is far faster than litigation -- but it only works where every heir genuinely agrees; it cannot be imposed on a dissenting heir.
Handled by: District civil courts (Succession Certificates); banks, insurers, depositories/RTAs and EPFO under their own sectoral settlement rules
Who can use this: Anyone who believes they are a legal heir of a deceased person and disagrees with how a bank account, insurance policy, shares/mutual fund holding, or provident fund balance is being claimed or has already been paid out to a person named as 'nominee.' Also useful for a nominee who wants to understand their own real legal position before distributing (or refusing to distribute) money to other heirs.
This does not cover: This route does not itself decide a genuinely disputed family relationship or the validity of a Will -- that is for the civil court. It does not apply to jointly held bank accounts operated as 'Either or Survivor'/'Former or Survivor,' which usually vest in the surviving holder under the account's own mandate, separately from nomination law. It also does not cover a nominee who has already spent the money and is now insolvent -- that becomes an ordinary, harder-to-recover money claim. For EPF/gratuity, the statutory 'family' definition in that scheme (narrower than general legal heirs) controls, not this general succession-law framework.
Time limit: No fixed deadline to assert your inheritance share against a nominee, but a civil suit for recovery/accounts is generally subject to a 3-year limitation running from when the nominee clearly refuses to share -- act without unreasonable delay once that happens. (Limitation Act, 1963, Article 113 (residuary 3-year period, from when the right to sue accrues))
Cost: Succession Certificate: roughly 2-3% court fee on the estate's value, with state-specific caps. Simplified bank/company settlement is usually free or a nominal indemnity-bond stamp cost.
You'll need:- Which type of asset is involved (bank account, insurance policy, demat/mutual fund folio, EPF, etc.)
- The date of death and a certified death certificate
- Whether the deceased left a registered or unregistered Will
- The deceased's religion/personal law, to identify which succession law applies
- Names and relationships of every other potential legal heir
- The approximate value of the asset in dispute
- Who is currently named as nominee, their relationship to the deceased, and whether they have already been paid
Documents that help:- Death certificate
- Any Will, registered or unregistered
- Proof of relationship to the deceased (birth/marriage certificates, ration card, etc.)
- Passbook, policy document, or demat/folio statement showing the nominee named
- Legal Heir Certificate, if already obtained
- PAN/Aadhaar of all claimants
What happens after: A Succession Certificate (or a probated Will) lets you compel payment directly from the bank/company/nominee, and gives the payer full legal protection under s.381, Indian Succession Act -- so institutions cooperate with it readily. If a nominee still refuses after that, the certificate/Will is your evidence in a civil recovery suit. An order in such a suit can be executed like any money decree; a genuine family-partition dispute may instead need a separate partition suit for immovable property.
These are the remedies Indian law provides for this kind of situation -- not a recommendation, and not every remedy will apply to your own facts.
Civil suit for recovery / rendition of accounts
Civil Court -- ordinary money-suit or original civil jurisdiction
A legal heir can sue a nominee who has already collected and refuses to share the money, asking the court to order recovery of the heir's rightful share and, where the nominee has mixed or invested the funds, to render an account of what was received and how it was used -- reflecting the settled trustee-not-owner position from Sarbati Devi and Shakti Yezdani.
Suit for declaration that the nominee holds the asset in trust
Civil Court
Section 34 of the Specific Relief Act, 1963 lets an heir seek a court declaration that the nominee holds the asset (or its proceeds) as a trustee for the real legal heirs under succession law, rather than as owner -- useful where the nominee or a third party disputes the heir's entitlement outright.
Temporary injunction to prevent the nominee dealing with the asset
Civil Court, alongside a filed suit
Order XXXIX of the Code of Civil Procedure, 1908 lets a court restrain a nominee from selling, transferring, or otherwise dealing with the disputed money or asset while a suit over the heirs' entitlement is pending, preserving it until the dispute is resolved.
Succession Certificate to compel direct payment
District Judge's Court
Rather than suing a nominee after the fact, an heir can apply for a Succession Certificate under s.372 of the Indian Succession Act, 1925 before payout -- once granted, s.381 obliges the bank/company to pay the certificate holder directly, with full legal protection for doing so, sidestepping the nominee dispute altogether where the institution has not already paid out.
My mother named my brother as nominee on her fixed deposit -- does that mean the money is legally his?
No, not automatically. For a bank deposit, the Supreme Court's settled position (extended most recently in Shakti Yezdani v. Jayanand Salgaonkar, 2023 INSC 1076, for shares/mutual funds, following the same logic as Sarbati Devi v. Usha Devi for insurance) is that a nominee is only a trustee who collects the money on the bank's behalf -- ownership is decided separately by your mother's Will, or if there is none, by the succession law that applies to her.
Is life insurance different from a bank account when it comes to nominees?
Yes, in one specific way. Since the 2015 amendment to s.39(7) of the Insurance Act, if the nominee is the policyholder's spouse, parent, or child (or spouse and children), that nominee genuinely owns the payout, not merely collects it for others. This 'beneficial nominee' rule does not exist for bank deposits, shares, mutual funds, or EPF -- there, the trustee rule applies regardless of the nominee's relationship to the deceased.
What is the real difference between a Legal Heir Certificate and a Succession Certificate?
A Legal Heir Certificate, issued by a Tahsildar/Revenue officer, only identifies who the heirs are -- it is not conclusive proof of authority to collect money. A Succession Certificate, issued by a civil court under s.372 of the Indian Succession Act, actually authorises the holder to collect debts and securities, and under s.381 gives the payer full legal protection. Banks and companies typically insist on the latter once an amount is disputed or above their own simplified-settlement threshold.
Do I really need to go to court for a small amount, like a savings account with Rs.2 lakh?
Usually not. The RBI's 2025 Directions fix a simplified-settlement threshold -- Rs.15 lakh for a commercial bank, Rs.5 lakh for a co-operative bank -- below which the bank must settle using a Legal Heir Certificate/affidavit, an indemnity bond, and a no-objection letter from the other heirs, without insisting on a succession certificate. Ask the specific bank only about its documentation process, not whether the threshold itself applies.
The nominee has already received and spent the money. Can I still get my share?
Legally, yes -- your right as a legal heir does not disappear because the nominee already collected the money; you can still bring a civil recovery suit against them. Practically, this becomes a harder, ordinary money-recovery problem if the nominee has genuinely spent or has no funds left, which is why raising the issue promptly (before payout, if you learn of it in time) is far more effective than after the fact.
Governing law: Insurance Act, 1938 (s.39); Banking Regulation Act, 1949 (ss.45ZA-45ZF); Companies Act, 2013 (s.72); Indian Succession Act, 1925 (ss.372-381)
Source: Insurance Act, 1938, s.39; Banking Regulation Act, 1949, ss.45ZA-45ZF; Companies Act, 2013, s.72; Sarbati Devi v. Usha Devi, (1984) 1 SCC 424; Shakti Yezdani v. Jayanand Salgaonkar, 2023 INSC 1076; RBI's 2025 Directions on settlement of deceased customers' claims.
Aadhrix does not decide which route applies to you. This describes the official process as published — consider an advocate for advice specific to your situation.