Nominee is not the owner of MF or bank accounts after the holder’s death: What determines who gets the money?

When you invest in a mutual fund, buy insurance, or open a bank account, picking a nominee is one of the first things you are asked to do. It allows these institutions to know whom to contact if the account holder dies.

Because of this, many people assume that the nominee automatically becomes the owner of the money after the account holder’s death.

However, the role of a nominee is usually more limited than most people think. In most cases, a nominee acts only as a custodian until the rightful legal heirs receive the assets such as shares, property or insurance money.

What determines the rightful ownership of property

The final ownership of money in a bank account, mutual fund, or other assets is generally determined by a valid will, succession laws, and the rights of legal heirs, not merely by the nominee mentioned in the account.

If the deceased person has left a legally valid will, the assets are distributed according to that will. In the absence of a will, the applicable inheritance or succession laws decide who has the rightful claim over the money and property.

Although probate is no longer mandatory in India following a legal change in 2025, it can still play an important role in ensuring a smooth transfer of assets and reducing the scope for disputes. It is a legal process through which a civil court verifies the authenticity of a will and authorises the executor named in it to administer the deceased person's estate.

Key documents for the inheritance process

A comprehensive estate plan usually includes several legal documents that clearly state your wishes and explain how your assets should be distributed among family members in the event of your death or in case you become seriously ill and are unable to make decisions yourself.

While not every component is necessary for everyone, the following documents may be included, depending on your financial situation and needs:

• Will: A legal document that states how your assets should be distributed and, if applicable, names guardians for minor children. This is the most common way of dividing assets and must be considered.
• Trusts: Helps in managing assets, reducing estate taxes in some cases, and avoiding probate (the legal process of transferring assets after death).

• Power of attorney: Authorises a trusted person to handle your financial or legal affairs if you become incapacitated.
• Beneficiary Designations: Ensures assets such as life insurance, retirement accounts, and investments are directly transferred to a named beneficiary without going through probate.

A well-prepared estate plan ensures the original owner's wishes are honoured, minimises the risk of disputes among legal heirs in the later stage, and provides clarity during an emotionally difficult time. It is typically prepared with the assistance of an estate planning lawyer.