What Happens If Nominee And Legal Heir Are Different?

In cases where the nominee for a property, bank account, or financial asset is different from the legal heir (the person entitled to inherit under Indian succession laws), it can create complications. The role of a nominee is often misunderstood, as they are seen as the rightful beneficiary in the event of the holder's death. However, a nominee's role is primarily that of a trustee, not an owner. The legal heir, on the other hand, holds actual rights to the inheritance based on the laws of succession, whether under the Hindu Succession Act, Muslim Personal Law, or other applicable laws. This discrepancy between nominee and legal heir can lead to legal disputes.

Key Legal Aspects in Case of Discrepancy:

Role of the Nominee:

A nominee is typically someone named by the account holder (or property owner) to receive assets in the event of their death. However, the nominee is not always the legal heir.

The nominee’s role is to receive the asset temporarily and is considered a trustee until the legal heirs or rightful successors come forward to claim their rights.

In the case of a bank account or insurance policy, the nominee is required to collect the funds and distribute them according to the legal heirs' entitlement, unless specifically stated otherwise in the policy.

Role of the Legal Heir:

A legal heir is a person who is entitled to inherit the property under the Indian Succession Act or personal laws (such as the Hindu Succession Act for Hindus or Muslim Personal Law for Muslims).

The legal heir has an inherent right to the deceased's property, which includes immovable (real estate) and movable (bank accounts, assets) property.

In the event of a dispute, the legal heir must prove their relationship to the deceased through documents like a legal heir certificate, will, or succession certificate.

Nominee vs. Legal Heir in Property and Bank Accounts:

In bank accounts, if the nominee and legal heir are different, the bank generally pays the nominee, who acts as the interim recipient of the funds. However, the legal heir can claim their share of the asset later.

Property Transfer:

When it comes to immovable property, a nominee can only hold the property in trust, not as an owner. In such cases, the legal heirs must claim ownership through succession and inheritance laws.

In some cases, if the nominee is not the legal heir, they may be required to transfer the asset to the rightful heirs if a court decides in their favor.

Legal Heirs' Right to Claim the Property:

If the nominee is different from the legal heir, the legal heirs have the right to claim the property under inheritance laws. If the nominee is not the rightful heir, the nominee's claim can be contested in a court of law.

Courts usually follow the principle that nominees do not have absolute rights to the property unless specifically designated as the owner in a legal document like a will.

Resolution of Disputes:

Court Intervention:

If the legal heirs disagree with the nominee’s claim, they can approach the court for a succession certificate or probate of the will, especially if the property or account is disputed.

Witnessing Documents:

If the nominee and the legal heir cannot agree on the distribution, they may need to present documents like a will, heirship certificate, or proof of relationship to establish who is entitled to the property.

Example:

Imagine Mr. Kumar has a bank account where his son, Rahul, is the nominee. However, after Mr. Kumar's death, it is found that his daughter, Priya, is the legal heir under the Hindu Succession Act, as the only surviving family member. Rahul may collect the funds from the bank, but Priya, as the legal heir, can claim her share of the inheritance. If Rahul refuses to share the funds, Priya could file a case in the court for her rightful share.

Important Legal Points:

Nominee as Trustee:

A nominee does not have ownership rights. They are considered a trustee of the property, meant to hold the asset temporarily until it is transferred to the rightful heirs.

Legal Heirs’ Right to Inherit:

Legal heirs have the right to inherit the deceased's property, even if the nominee is different. The law prioritizes the rights of legal heirs over those of a nominee unless there are specific provisions in a will.

Probate and Succession Certificates:

In cases of a dispute, the legal heir may have to obtain a succession certificate or probate to establish their legal right to the deceased's assets.

Inheritance Laws:

Depending on the religion of the deceased, inheritance laws may differ:

• For Hindus, the Hindu Succession Act applies.
• For Muslims, Muslim Personal Law applies.
• For Christians and Parsis, the Indian Succession Act applies.

Conclusion:

When the nominee and legal heir differ, the nominee holds the asset only temporarily as a trustee. The legal heir has the right to inherit the property, and if a conflict arises, the matter can be taken to court for resolution. In the case of property or financial assets, the nominee’s claim may be disputed by the legal heir who can establish their right through inheritance laws. The nominee's role is to facilitate the transfer of assets, but it is the legal heir who ultimately has the ownership rights.