Frequently asked questions (FAQs) on legal heirs and nominees in India
This article gives you a list of common terms in use in Indian succession law on the concept of legal heirs, nomination and the concept of making a will.
Frequently asked questions (FAQs) on legal heirs and nominees in India
Posted on 17 Dec 2023
Author: Sayan Sircar
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This article gives you a list of common terms in use in Indian succession law on the concept of legal heirs, nomination and the concept of making a will.
This article is a part of our detailed article series on the concept of nominees, legal heirs and wills in India. Ensure you have read the other parts here:
-
How a fight between brothers over nomination of their father's shares required the Supreme Court to pass a judgement
This article touches upon the important distinction between nominees and legal heirs in India and shows the right thing to do avoid disputes over succession.
-
Why you must complete your mutual fund nominations before 31st December 2023?
As per SEBI rules, mutual fund investors must have nominees in their folios or explicitly opt out. Otherwise they will face restrictions in selling units.
š Topics covered:
- Who is a legal heir as per Indian family law?
- Who are the actual legal heirs?
- Are all legal heirs the same in terms of succession?
- What are Class 1 heirs?
- What are Class 2 heirs?
- What is the need to have a legal heir?
- What is intestate succession?
- What happens when a person dies without a will?
- What is a will?
- Who is a nominee?
- Is the nominee the same as the legal heir?
- What about nominees in the case of insurance policies?
- What is the use of nomination if the nominee is not the legal heir?
- Why do banks and mutual funds insist on making nominations?
- What is the role of nomination since the nominee is not the legal heir?
Who is a legal heir as per Indian family law?
In Indian family law, legal heirs are individuals entitled to inherit the property of a deceased person. The inheritance rights of legal heirs are determined by various personal laws, such as Hindu Law, Muslim Law, Christian Law, and other succession-related statutes like the Indian Succession Act, of 1925.
Who are the actual legal heirs?
The concept of legal heirs primarily includes relatives such as spouses, children, grandchildren, parents, and in certain cases, even distant relatives, depending on the specific personal law applicable to the deceased personās religion or community.
Are all legal heirs the same in terms of succession?
All legal heirs are not the same as a hierarchy exists called Class 1, Class 2 etc. The hierarchy of legal heirs may vary based on the personal laws applicable to the deceased. For instance, under Hindu Law, the heirs are classified into different classes, and the inheritance rights are based on the principle of survivorship within these classes.
What are Class 1 heirs?
Under the The Hindu Succession Act, 1956/2005,
- Class 1 heirs include the immediate family members of the deceased.
- They comprise the widow, children (both sons and daughters), and the mother.
- In case any of these members are not alive, their descendants inherit their share by substitution.
What are Class 2 heirs?
- Class 2 heirs are next in line if there are no Class 1 heirs available.
- They consist of the father, the widow of a predeceased son, the sonās daughter, the sonās sonās daughter, the daughterās son, the daughterās daughterās son, the fatherās mother, and the brother.
- Like Class 1 heirs, if any of the Class 2 heirs is not alive, their descendants inherit their share by substitution.
Itās important to note that the succession rights of these classes of heirs are determined based on their proximity to the deceased. If there are surviving members from Class 1, Class 2 heirs will not inherit.
These provisions dictate the order of inheritance in case of intestate succession (where the deceased did not leave a valid will) among Hindu families. However, itās crucial to consider that the distribution and shares might vary depending on the specific circumstances and personal laws applicable to the case.
What is the need to have a legal heir?
The determination of legal heirs is a critical aspect in matters of inheritance, succession, and estate planning, as it directly impacts the transfer of assets after an individualās demise.
Itās essential to note that the rights and shares of legal heirs are subject to various factors, including the deceasedās will (if any), the nature of the property, and any applicable legal provisions that might impact the distribution of assets among legal heirs.
What is intestate succession?
Intestate succession refers to the legal process of property distribution that occurs when an individual passes away without leaving a valid will or testamentary document dictating how their assets should be distributed after their death.
What happens when a person dies without a will?
In such cases, the laws of intestate succession come into effect, specifying how the deceased personās estate and assets will be distributed among their legal heirs. The applicable laws vary based on the individualās religion, personal law, or in certain cases, the Indian Succession Act, 1925, for those not governed by specific personal laws.
Key points regarding intestate succession in India include:
- Determination of Heirs: The laws governing intestate succession define the line of succession and the relatives who are entitled to inherit the deceased personās estate.
- Order of Inheritance: The order of inheritance among the legal heirs is typically based on predefined rules outlined in the specific personal laws or succession laws applicable to the deceased individualās community or religion.
- Distribution of Assets: The assets and property are distributed among the legal heirs as per the rules of intestate succession, often following a specific hierarchy or priority among the different classes of heirs.
The laws of intestate succession aim to ensure fair and just distribution of the deceasedās estate among the rightful heirs in the absence of a valid will or testament. However, the specifics of how assets are distributed can significantly vary depending on the personal laws applicable to the deceased personās religion or community.
What is a will?
A will, in legal terms, is a formal and legal document that outlines an individualās wishes and instructions regarding the distribution of their assets, properties, and belongings after their death. It serves as a crucial estate planning tool, allowing a person (referred to as the testator) to express their desires on how their estate should be managed and distributed among chosen beneficiaries or heirs.
Who is a nominee?
A nominee is a temporary custodian of assets until the transfer to the legal heir is completed
A nominee, in financial terms, is an individual designated by an account holder or policyholder to receive the benefits or proceeds of a financial asset or investment in the event of the account holderās death. The nominee acts as a trustee of sorts, entrusted with the assets until they are rightfully transferred to the legal heirs or beneficiaries.
Nomination is a common practice in various financial instruments such as bank accounts, insurance policies, mutual funds, and other investment vehicles. When an account or policyholder nominates someone, that nominee gains the right to claim the assets or benefits in case of the account holderās demise.
Is the nominee the same as the legal heir?
The role of a nominee is different from that of a legal heir. While a nominee receives the assets or benefits, they may not necessarily be the rightful owner. The nomineeās responsibility is primarily to receive the assets and hold them in trust until the legal heirs are determined and the assets then transferred.
What about nominees in the case of insurance policies?
As per the Insurance Act 2015, it is better to have immediate family members like parents, spouse, or children as beneficiaries or ānomineesā of an insurance policy. These family members, being Class 1 heirs, will anyway receive the proceeds of the insurance policy and it will be easier for them to get it directly from the insurance company. The word beneficiary nominee is used here since the nominee here benefits financially post the death of the policyholder.
What is the use of nomination if the nominee is not the legal heir?
As per Supreme Court judgement on 14-Dec-2023:
ā¦the provisions of the Companies Act, 1956 and 2013 the intention of having a nominee in the share/debenture certificate is to only aid the process of transfer of shares and not be made a successor (original quote from moneycontrol.com)
Nomination as a concept exists solely to make it easy to transfer the assets after the death of an individual. Ultimately, these assets will be passed on to the legal heirs.
Why do banks and mutual funds insist on making nominations?
Banks, mutual funds and other financial institutions insist on making nomination since it make their lives easier to give the assets to some living person. In case there is no nomination, these assets will lie unclaimed. The legal heirs will have to first locate the assets and go through lengthy and complicated processes to claim the assets by producing legal heir certificate etc.
Related:
Why you must complete your mutual fund nominations before 1st October 2023?
What is the role of nomination since the nominee is not the legal heir?
In the absence of a will, the assets of the deceased individual, which have a nominee assigned, may be transferred to the nominee as per the terms and conditions of the financial institution or investment company. However, the nominee is expected to distribute the assets to the legal heirs as per the succession laws or as determined by the deceasedās intentions via a will.
Related Articles
- How a fight between brothers over nomination of their father's shares required the Supreme Court to pass a judgement
- Why you must complete your mutual fund nominations before 31st December 2023?
- Who should invest in the name of parents to save tax? Who should not?
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