As it is widely known that investing in Fixed Deposit (FD) not only allow you to get higher returns along with tax benefits, but also enable you to make sure that your capital is secure until maturity. But here the matter of fact is that if the deposit holder dies before the deposit matures, loved ones must be aware of the terms and conditions for withdrawing the principal amount as well as any accrued interest. The procedure for filing a claim differs depending on the type of FD account and the type of depositor. The following are the most common types of FD accounts provided by banks, as well as the steps to claim the deposit amount in the event of the death of a family member.
Single FD account with and without nomination
In case a depositor have an FD account individually or in a single name with a nomination, then the designated nominee can only seek the FD amount upon the depositor's death by providing the depositor's death certificate and proof of identity. If there is no nomination, the depositor's family members must file a succession certificate, as well as the depositor's death certificate, to claim the funds. The bank will request a legitimate heir certificate if there is succession certificate and the money will be divided equally among all legitimate heirs.
In case of Joint Accounts
If the depositor have a joint account, the claim process will be determined by the category of joint account, which includes "Either or Survivor," "Anyone or Survivors," "Former or Survivor," "Latter or Survivor", "Jointly" and "Jointly or Survivor".
"Either or Survivor"
This account can only be operated by two individuals: the primary account holder and the secondary account holder. On the death of any of the account holders, the total balance and interest (if any) will be paid to the survivor. The account can be continued by the survivor. And if the account has a nomination, the funds will go to the survivor. And if both account holders die then the nominee will be allowed to claim the amount. The maturity proceeds will be divided among the legitimate heirs of both depositors in case both the account holders die and there is no nominee.
"Anyone or Survivor"
This is close to the above-mentioned joint account. In this case, though, the account can be operated by more than two individual persons. All in the family members can manage this kind of joint account. In case of death of one or more account holders and if there are more than two individuals named on the FD, the bank will reimburse the total balance and interest to the survivors. The nominee will receive the funds until all depositors die. If no nomination is made, the fund will be transferred to the legitimate heirs of the late depositor and the surviving deposit holders upon the death of one or more depositors. The proceeds will be distributed to the legitimate heirs of all depositors upon their death.
"Former or Survivor"
Only the primary account holder can access and manage this form of joint account until hos or her demise. Only after the primary account holder has expired the second account holder can run the account and withdraw funds. The second account holder will be required to file the first account holder's death certificate to claim the funds. The eligible nominee will be allowed to withdraw funds on n the death of both holders. The money will be allocated to the legitimate heirs of all depositors if there is no designated nominee and all depositors die.
"Latter or Survivor"
This works in the same way as the "former/survivor" account. The distinguishing factor is that only the second account holder can manage the account until he or she dies. Only after the death of the secondary account holder, the primary account holder (first account holder) can manage the account and withdraw funds accordingly. When all depositors die, the principal amount, plus any interest, will be paid to the nominee. If there is no nominee and all account holders die, the money will go to the legitimate heirs of the holders.
All transactions in this type of account must be approved and confirmed by all account holders. The account will be become inactive if any of the account holders dies and the maturity proceeds will be paid to the survivor.
"Jointly or Survivor"
This is identical to the above discussed option "jointly." The main distinction is that the account can be operated by the survivor. Conversely, the account's proceeds will be provided to him or her.
In addition to the above alternatives, there is a type known as a "Minor Account." An adult guardian can be added as a joint account holder if the primary account holder is under the age of 18 years old. If the mode of service is "either or survivor" or "jointly," all current account holders must sign the application form which is an important point to note here. According to the RBI guidelines, deposit accounts under which a valid nomination is available and opened under the survivor provision i.e. either or survivor or former or survivor or anyone or survivor or latter of survivor; the payment to the survivor(s)/nominee of the deposit account is a valid release of the liability of the bank provided once it has been adequately looked after, and cautioned in the deposit account.
Such bank payments to the survivor(s)/nominee does not impact any person's right or claim against the survivors. Banks should not rely on presenting the legal representation/succession certificate/letter of administration or probate, etc. In the event of accounts without the survivor/nominee provision, banks may set a minimum balance threshold in the deceased account for which claims are to be settled and without requiring any documents other than the indemnity letter. The banks may follow the same procedure for the deposit accounts in order to access the contents of the locker/safe custody article concerning the death of the locker holder/article depositor.
The repayment of claims and disbursement payments to survivors / nominees is approved by the banks for payment within a span of not more than 15 days after the date on which the claim has been received subject to a proof of the death of the depositor and appropriate acknowledgement of the claim(s). In the case of missing persons, claims can be addressed on the grounds of presumption of death, which can be addressed only after a period of seven years has passed after the person was declared missing to a competent court and the court presumes the individual is dead under Section 107/108 of the Indian Evidence Act, 1872. By establishing a threshold cap, banks can devise a policy to address claims in respect of lost individuals without depending on the submission of any documents other than the FIR, the traceable report by police authorities and indemnity letter.