« Best Investment Choices for US NRIs in Indian Stocks: a Rolling Returns Analysis How a fight between brothers over nomination of their father's shares required the Supreme Court to pass a judgement »

Frequently asked questions (FAQs) on legal heirs and nominees in India

Posted on 17 Dec 2023
Author: Sayan Sircar

Tags: FAQ

10 mins read
📢Join 2400+ readers on WhatsApp and get new post notifications!
🤖 Parts of this article are AI-generated and then 100% fact-checked by a human.

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

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.

📚 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 person’s religion or community.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

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 son’s daughter, the son’s son’s daughter, the daughter’s son, the daughter’s daughter’s son, the father’s 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.

It’s 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, it’s 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 individual’s demise.

It’s essential to note that the rights and shares of legal heirs are subject to various factors, including the deceased’s 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 person’s estate and assets will be distributed among their legal heirs. The applicable laws vary based on the individual’s 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 person’s 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 individual’s 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 deceased’s 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 person’s religion or community.

What is a will?

A will, in legal terms, is a formal and legal document that outlines an individual’s 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 holder’s 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 holder’s 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 nominee’s 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 “nominees” 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:

…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.

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 deceased’s intentions via a will.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

To understand how this article can help you:

If you have a comment or question about this article

The following button will open a form with the link of this page populated for context:

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Worked out case studies for goal-based investing

Case study: how can this middle-aged investor with two children plan for retirement and children's goals?

This article shows how a single-income middle-aged couple with two small children reach their retirement and children’s goals.
Case study: can this double income single kid family reach FIRE at 50?

This article shows how a double-income couple with a 2-year old reach their FIRE dream at the age of 50.
Case study: how a family in their mid-30s with a newborn kid can FIRE and invest in real estate?

This article shows how a double-income couple with a newborn child can invest for their future goals of FIRE and real-estate investment.
Case study: how this double income recently married family can perform DIY goal-based investment planning

This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Case Study: How should couples in their 40s with a new baby plan their financial future?

Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the child’s (and your’s financial future)
Case study: how this double income single kid family can perform DIY goal-based investment planning

This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.

Previous and next articles:

<p>The article uses rolling returns to compare various investment options for US-based NRIs intending to invest in the Indian stock market.</p>

NRI

Best Investment Choices for US NRIs in Indian Stocks: a Rolling Returns Analysis

The article uses rolling returns to compare various investment options for US-based NRIs intending to invest in the Indian stock market.

Published: 17 December 2023

10 MIN READ

<p>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.</p>

News

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.

Published: 17 December 2023

4 MIN READ

Latest articles:

<p>This article shows how to understand the impact on your portfolio if you stop investing for a few years between today and retirement to buy a house.</p>

House Purchase Mutual Funds

What happens to your mutual fund portfolio final value if you choose to buy a house?

This article shows how to understand the impact on your portfolio if you stop investing for a few years between today and retirement to buy a house.

Published: 8 May 2024

2 MIN READ

<p>This article helps you get NPS NAV data via an easy to use API so that you can easily calculate, using Excel or Google Sheets, how much money you have in NPS.</p>

Market Data NPS

How to use Arthgyaan API to get NPS NAV to calculate your NPS corpus value?

This article helps you get NPS NAV data via an easy to use API so that you can easily calculate, using Excel or Google Sheets, how much money you have in NPS.

Published: 5 May 2024

3 MIN READ

Topics you will like:

Asset Allocation (21) Basics (8) Behaviour (12) Budgeting (12) Calculator (25) Case Study (6) Children (17) Choosing Investments (40) FAQ (12) FIRE (13) Gold (22) Health Insurance (5) House Purchase (31) Insurance (16) International Investing (12) Life Stages (2) Loans (18) Market Data (8) Market Movements (17) Mutual Funds (47) NPS (8) NRI (19) News (18) Pension (8) Portfolio Construction (53) Portfolio Review (27) Reader Questions (8) Real Estate (7) Research (5) Retirement (38) Review (15) Risk (6) Safe Withdrawal Rate (5) Set Goals (28) Step by step (15) Tax (59)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.