Case 007Estate, succession and trustsCore

A client's Rs 80 lakh deposit names her brother as nominee, but her will leaves everything to her daughter. After her death, who receives the money from the bank, and who owns it?

The situation

Madhavi Rege, a widow, opened a Rs 80 lakh fixed deposit twelve years ago and named her younger brother Vijay as nominee, because her daughter Anuja was then a minor. She later wrote a will leaving her entire estate to Anuja, now 29. Her other assets are a flat worth Rs 1.5 crore, which the will covers, and mutual funds of Rs 40 lakh on which Anuja is the nominee.

Madhavi has died. Vijay has submitted a claim to the bank as nominee. Anuja, your client, asks who gets the deposit. Answer with the framework Indian courts have applied, and tell her to confirm the current position with a lawyer, because the rules for different kinds of assets have been tested separately.

Your task

Who receives the money, who owns it, what could this cost Anuja, and what should Madhavi's adviser have done while she was alive?

Quick check

The bank pays the Rs 80 lakh to Vijay as nominee. In the framework Indian courts have generally applied, what is Vijay's position?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

The bank pays Vijay, the nominee, but Anuja owns the money under the will. A nomination lets the bank discharge its duty by paying a named person; it does not decide who inherits. Vijay holds the Rs 80 lakh for Anuja. If he refuses to pass it on, she must enforce the will through the courts, which could cost her about Rs 21 lakh in delay and fees.

Step 1What does a nomination actually do?

Think of a courier who is told to hand a parcel to whoever is at the front desk. Handing it over ends the courier's job; it does not make the receptionist the owner of what is inside. A nomineeThe person named on an account or policy to receive the money when the holder dies, so the institution can pay out without waiting for the estate to be settled. is the person the bank may safely pay, and paying the nominee discharges the bank; ownership is decided by the will or, without one, by succession law. Indian courts have generally read bank nominations this way, holding that the nominee receives the money for the legal heirs. That is the framework; Anuja should have a lawyer confirm how it applies today, since the treatment of shares, insurance and deposits has been argued separately.

The nominee is who the bank pays; the will says who ownsThe bankRs 80 lakh depositnominee on file: brotherHer brother, Vijaynominee: receivesas custodian, not ownerHer daughter, Anujalegatee under the will:the ownerpays, and thebank is dischargedmust hold forand pass onMadhavi's will: everything to Anuja. The will decides ownership; the nomination decides only who is paid first.If Vijay passes it onAnuja receives Rs 80 lakh withinweeks, with nothing lostCost: paperwork onlyIf Vijay refusesAnuja proves the will and claims itin court: say 3 years and Rs 3 lakhCost: about Rs 21 lakh of growth and fees
The bank pays the Rs 80 lakh to Vijay as nominee and is discharged, but Madhavi's will makes Anuja the owner, so Vijay holds the money as custodian; if he refuses to pass it on, Anuja's claim could cost her about Rs 21 lakh in delay and fees.
Step 2How does the whole estate look asset by asset?

Put every asset in a row and ask two separate questions of each: who does the institution pay, and who owns it? Most estate problems live in the rows where those two answers differ, and here there is exactly one.

AssetValue, Rs lakhWho is paid firstWho owns it under the will
Fixed deposit80Vijay, the nomineeAnuja
Mutual funds40Anuja, the nomineeAnuja
Flat150Transferred to Anuja on proof of the willAnuja
Estate270All to Anuja
Of Madhavi's Rs 270 lakh estate, only the Rs 80 lakh deposit is paid to someone other than its owner, because the nomination was never updated to match the will.
Step 3What could the mismatch cost Anuja?

If Vijay accepts that he holds the money for her, very little: some paperwork and a few weeks. If he disputes it, Anuja must prove the will and claim the money from him, which can take years. On Rs 80 lakh, three years of delay at an illustrative 7% is about Rs 18.0 lakh of growth she does not get, before an illustrative Rs 3 lakh of legal fees and whatever it does to the family. The law is on her side; the cost is time, money and relationships.

Step 4What should Madhavi's adviser have done?

Kept the nominations in line with the will. The brother was a sensible nominee when Anuja was a child; the day she turned 18, or the day the will was signed, the nomination should have been changed to her. An annual estate check that lists every account, its nominee and the will's instruction for it takes an hour and prevents exactly this dispute. Where a client wants someone other than the heir to handle the money for a while, for a young or vulnerable heir, a properly drafted trust or a clear letter of wishes does that job better than a nomination that says the wrong thing.

The limitation to say out loud: this is a framework, not legal advice. The meeting's job is to explain the likely position calmly, keep the family talking, and get Anuja to a lawyer with the will, the deposit receipt and the bank's claim papers.

Where candidates lose it

The common error is saying the nominee wins because the bank paid him. That confuses who receives with who owns, the one distinction the question exists to test.

The second is stopping at the law. Interviewers want the cost of the mismatch in rupees and years, and the prevention: an adviser who aligns nominations with the will on every account.

What the interviewer asks next

  • Madhavi had no will. Who owns the deposit then, as a framework?
  • Would your answer change for shares held in a demat account with the same nomination?
  • How would you run an annual nomination check across a client's accounts?

Company names and figures are illustrative.