Fixed deposits have been the preferred investment option for Indians for many decades. The guarantee of a fixed return and near-zero risks make it a safe and reliable investment option.
While a deposit can be held jointly, the FD, a contract, is usually between the first holder and the institution. So, what happens if the primary holder dies before the maturity of the deposit? How can the claim be filed?
Here is everything that you need to know about claiming a fixed deposit after the death of the primary holder.
The Reserve Bank of India (RBI) has stipulated stringent guidelines for dealing with claims due to the death of the primary holder of a fixed deposit.
When you open a Fixed Deposit account, you can choose to be the only account holder or open it jointly. For jointly held fixed deposits, you need to choose the operational mandate. The commonly used mandates are:
Here is how financial institutions handle claim payments after the death of the account holder of an FD:
If the FD is held by an individual (only), then upon the death of the account holder, the nominee needs to submit the death certificate of the account holder to withdraw the funds. The nominee is also required to submit proof of his/her identity.
If an individually-held fixed deposit account does not have a nominee, then the legal heirs are required to submit a death certificate along with a succession certificate to withdraw the funds.
Here are the processes for claiming a Fixed Deposit after the death of a joint account holder:
The nominee comes into the picture only when all the account holders in a jointly-held fixed deposit expire. If the legal heirs have a succession certificate, then they can claim the fixed deposit proceeds from the nominee.
If the survivors want to claim the fixed deposit prematurely after the death of the primary account holder, then the process is slightly more complex.
The legal heirs or the appointed nominee can request for a premature withdrawal of the fixed deposit in the event of the demise of the sole holder of the FD. However, they will have to produce documents like the death certificate, their KYC documents, and various other documents as specified by the financial institution to close the account.
There might be a loss in interest based on the timing of the premature withdrawal.
In the case of joint accounts, the survivor can request a premature withdrawal of the FD only if all the joint account holders give a mandate at the time of opening the account.
It is important to remember that a premature withdrawal of FDs in the event of the demise of the account holder is permitted only if the survivors and legal heirs agree to it.
If there are no survivors, then the nominee can request the same after providing all the required documents.
If there are no survivors or nominees, then the legal heirs can request for a premature withdrawal of the FD subject to compliance with the rules.
If you are opening a Fixed Deposit account, then it is prudent to ensure that you appoint a nominee regardless of whether you are opting for an individual or joint account.
The RBI has laid down rules to ensure that the funds go to the rightful successors after the death of the account holder. However, it is important to ensure that you understand these rules and create nominees and account types accordingly.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.