A deceased account is a bank account of a person who has passed away. On receiving the notice of the demise of a person, the bank freezes the bank account and hands over the money belonging to the deceased account. In case the belongings are stored in the bank locker, the bank handovers them to the legal beneficiary as nominated by the deceased person.
This blog helps understand all the nitty-gritty of how the funds can be transferred from the deceased account to the nominees, how to close a deceased account and more. Keep reading!
What is a Deceased Account?
A deceased bank account is an account owned by the deceased person. Once the bank receives notice of the death of the account holder, they freeze the bank account. Note, the bank cannot close the deceased account until the money and other belongings (in the bank locker) have been transferred to the nominee’s account.
However, in the case of the death of a joint account holder, the surviving account holder is deemed the sole account holder, and the account is not considered the deceased account.
If the deceased person holds a bank account that’s a pay-on-death account, the bank will not freeze the account. However, the bank releases the money to the person named as the beneficiary in the death certificate of the deceased account holder.
How Does a Deceased Account Work?
The banks prefer creditors over legal heirs or beneficiaries when a bank account is deemed a deceased account. Thus, deceased accounts hold significant importance when the deceased account holder has some unpaid debts to be paid off. Legal heirs or beneficiaries are not liable to pay off a deceased person’s debts unless they hold a joint debt. Eventually, creditors can recover their dues from whatever funds are available in the deceased account.
What is a Joint Account Where Nomination is Registered With the Bank?
When a person holds a joint account with another person, and one of the joint account holders dies, the bank must release the payments to the lawful heir to the deceased person and the surviving account holder of the joint bank account.
If one of the joint account holders makes it mandatory to handover the account balance in the form of, “either or survivor, former or latter or survivor, anyone of survivors or survivor, etc.,” the bank will make the payment aligning with the mandate given by the account holder. It helps avoid delays arising from the process of acquiring legal documents by the legal heirs of the deceased person.
What is a Joint Account Where No Nomination is Registered With the Bank?
When the deceased account holder has named no beneficiary and there are no disputes between the claimants, the bank pays the outstanding amount to the legal heirs or the person authorized by the legal heirs to receive the payment on their behalf upon joint application and indemnity by all legal heirs.
Insisting on legal documents up to the limit approved by the board of the bank is not required. It’s done to prevent delays in completing the legal processes from harming original depositors.
Interest Payable on Term Deposit in Deceased Account
According to the guidelines set forth by several Indian banks, in the case of the death of the depositor before the deposits reach maturity and the deposited amount is claimed after the maturity date, the bank is required to pay interest at the rate decided or negotiated until the deposits reach the maturity date.
The bank must also pay the simple interest at the rates applicable at the time of maturity of deposits. The banks pay the interest on deposits for the period during which the deposits are held with the bank even beyond the maturity date.
However, it depends on the policies set by individual banks concerning the date of maturity and the date when the payments shall be released. When the depositor dies before the deposits have matured, the banks must pay the interest at the rate of saving deposits from the date of maturity until the payment has been made.
How to Withdraw Money From a Deceased Account?
Anyone who wants to withdraw money from a deceased account has to produce the death certificate as a basic requirement for all claims. Furthermore, the proof of identity of the nominee or, in the case of another claimant(s), is also required. You can follow the steps below to access these documents: Death Certificate originally issued by the Registrar of Birth and Deaths, Municipality or Corporation or the Panchayat Office.
In case the account holder’s death has happened in a foreign country, and the death certificate has also been issued in a foreign country, the nominee or beneficiary must obtain the required documents from the said country to ensure their validity in India.
Eventually, the beneficiary must get the documents validated with a notary stamp or consul issued by the Indian Embassy.
How to Close a Deceased Account?
A deceased bank account cannot be closed until the completion of the legal processes such as the determination of the authenticity and validation of the will.
If the account holder has passed on, then the survivors can apply for the closure of the deceased bank account. This can be done by making a simple application accompanied by a photocopy of the death certificate for the bank’s records.
In the case of time deposits, the survivors have the option to continue the deceased person’s account by removing the deceased account holder’s name from TDR or STDR, or other fixed deposits.
Powers of Attorney on Deceased Accounts
The instances of Power of Attorney can be explained in two ways, revocable and irrevocable.
The power of attorney is revocable if the principal can revoke it at any time. After a person who has been given authority to act on their behalf dies, a revocable power of attorney is no longer valid. In this case, a power of attorney is no longer valid after death.
The agent’s power is not revocable until the duration of the date, except for special circ*mstances in the case of irrevocable power of attorney. Furthermore, the duration of irrevocable power of attorney is for a lifetime in most cases, leaving the Power of Attorney invalid after death.
As a result, power of attorney arrangements ends with the principal’s death. Surviving family members may have held a power of attorney that gave them access to an account while the deceased was alive, but once the bank is notified of the account holder’s death, they will no longer have access.
Final Word
Banks must be notified as soon as possible of the death of the account holder’s legal heirs. A death certificate, ID proof and account details must be provided to the bank to notify them of the death. Legal heirs will receive the proceeds from the deceased account if there are no debts owed to creditors. Furthermore, creditors would recover the account balance if there was an unpaid debt. If there is any remaining amount, it will be distributed to the surviving family members.
The surviving owner of a joint account will become the full owner of the account if the proceeds are distributed to the surviving owner. If the surviving owner wishes to continue operating the account, they may do so or close it since accounts held jointly with a deceased person are not considered deceased accounts.
FAQs on Deceased Account
Q1. What is a succession certificate?
Ans: A succession certificate is a document provided to the legal heirs of the person who has died without leaving a will. The document is issued to the successor of the deceased person who has died without leaving a will to verify the identity and authenticity of the successor.
Q2. What if no claim has been made on the deceased person’s bank account?
Ans: When no one has come forward to claim the money from the deceased person’s account, the bank can close the account or convert it to a dormant account. However, the bank is responsible to transfer the funds as soon as the legal heir has filed a claim in the respective bank account.
Q3. What happens in the case of no nomination?
Ans: If a bank account is neither a joint account nor has a nomination, the legal process is lengthy and cumbersome. The beneficiary will be required to produce a copy of the original succession certificate or the ‘will’ as part of the legal process.
Q4. How to withdraw money from a deceased account if a nomination is available?
Ans: If the deceased account has a nominee, the funds will be transferred to the nominee. However, the banks first check and verify the nomination and the original death certificate. In the case of a dispute over the nomination left by the deceased person, a copy of the ‘will’ must be presented to the bank. Two witnesses are also required to ensure that the bank pays the dues to the right nominee as the deceased account holder has mentioned in the nomination.
Q5. What if the nominee is a minor?
Ans: In the case of the appointed nominee as a minor, the person appointed to act on behalf of the minor until he reaches a majority must submit a written application to the Bank that includes full information about the deceased depositor’s accounts.
