A nominee is not your heir.

What a nomination actually does

Almost every Indian financial product asks you to name a nominee, and almost everyone assumes that settles the question of who gets it. It doesn't, and it never has.

A nomination is an instruction to an institution. It tells your bank, your depository or your fund house who they may hand the money to once you are gone. Its purpose is to give the institution a clean discharge — so that a bank paying out in good faith cannot be sued later for paying the wrong person.

Under Section 45ZA of the Banking Regulation Act, 1949, your bank can pay the nominee and obtain a valid discharge. Read carefully, that section protects the bank. It says nothing at all about ownership.

Ownership is decided somewhere else entirely: by your will, or — if you leave no will — by the succession law that applies to you.

What the Supreme Court said

The argument ran for decades in the High Courts, with genuinely conflicting judgments, until the Supreme Court closed it in Shakti Yezdani v. Jayanand Jayant Salgaonkar, decided on 14 December 2023.

The case was about shares. A father had nominated one of his sons on his securities. After his death, that son argued the nomination made him the owner. His brothers argued the shares formed part of the estate and had to be divided under succession law.

The Court held that a nominee does not acquire beneficial ownership to the exclusion of those entitled to inherit. Nomination, it said, is not a third mode of succession sitting alongside testamentary and intestate succession. It is a mechanism for the company or depository to deal with a single person, nothing more.

Two brothers spent years in court over a form their father filled in without much thought. That is the cost of the gap this article is about.

Where it bites, product by product

The rule is not uniform. This is the part most explanations get wrong.

Bank accounts and fixed deposits

The nominee collects; the legal heirs own. If the nominee is also the sole heir, nothing happens and nobody notices. If they aren't, the nominee holds the money as a trustee for whoever is actually entitled — and the family has to sort that out between themselves.

Shares and demat holdings

Same position, and this is the exact fact pattern the Supreme Court decided in 2023. Section 72 of the Companies Act, 2013 and the depository regulations let the company transmit to the nominee. Ownership still follows succession law.

Mutual funds

Same again. The AMC pays the nominee and is discharged. The folio closes, money lands in an account, and it all looks final — which is why disputes here surface late, sometimes years later.

EPF and PPF

Provident fund nominations sit under their own statutes and are treated as closer to a beneficial entitlement in practice, though the position is less settled than insurance. If your EPF nomination is out of date — and for most people who have changed jobs, it is — fix it. It is a ten-minute job on the EPFO portal.

Life insurance — the real exception

Insurance genuinely is different, and the difference is statutory.

The Insurance Laws (Amendment) Act, 2015 rewrote Section 39 of the Insurance Act, 1938 with effect from 26 December 2014, and introduced the idea of a beneficial nominee. Where the policyholder nominates a parent, spouse or child, that nominee is beneficially entitled to the proceeds — they keep the money as their own, not as a trustee for the estate — unless it is shown the policyholder could not have intended to confer it.

So for a term policy naming your spouse, the payout is theirs. It does not fall into the estate to be divided. Nominate a sibling, a nephew or a friend, however, and you are back to the ordinary rule: they collect, the heirs own.

This single provision is why blanket statements like "a nominee is never the owner" are wrong, and why it is worth knowing which of your products the rule actually applies to.

What to do about it

• Write a will. It is the only document that decides ownership across everything you hold. Nomination forms cannot do that job however many you fill in.
• Then make your nominations agree with it. This is the step almost nobody takes. When a will and a nomination point at different people, the will governs ownership and the nomination still governs the payout — which is precisely how families end up in court.
• Review after anything changes. Marriage, divorce, a death, a birth. Nominations made in your twenties are the ones that cause trouble in your sixties.
• Check what your nominations currently say. Most people cannot answer this without logging in. Bank, demat, mutual fund folios, EPF, every policy.
• Write down where all of it is. A perfect nomination on an account your family has never heard of helps nobody. ₹86,917 crore sits unclaimed in India for exactly this reason.

Common questions

Can I name more than one nominee?

For most products, yes, and for bank accounts the law was amended to allow up to four. It makes the payout cleaner. It does not change the ownership position described above.

My bank said the nominee gets the money. Were they wrong?

No — they were answering a different question. The bank is right about payment and silent about ownership. Both things are true at once, and the gap between them is where families get stuck.

Does a will override a nomination?

For ownership, yes, outside the insurance exception. But the institution will still pay the nominee, because that is what its records say. The heirs then have to recover it. Far better to make the two documents agree while you are alive.

Is a will valid without registration?

Yes. Registration is optional in India and does not make a will more valid. What it gives you is a hard-to-dispute record that the document existed on a given date, which is worth having if you expect any friction. See our guide to what your family faces without a will.