The Nominee Is Not the Heir

The settled position is that a nominee cannot be equated with an heir. Nomination does not confer beneficial interest in the asset; the nominee receives it and holds it as an agent or trustee for whoever the legal heirs turn out to be, until succession is conclusively determined. Commentary describing the Supreme Court's reasoning is explicit that vesting in a nominee does not create a third mode of succession alongside a will and intestate succession — it is a mechanism for the institution to hand the asset to somebody, not a mechanism for deciding who owns it. The practical consequence is the one that surprises families: filling in a nomination form on every account, policy and holding, carefully and for years, settles nothing about who inherits.

Section 72 of the Companies Act, 2013 (and the corresponding provision of the 1956 Act) provides for nomination of shares and for those shares vesting in the nominee on the holder's death. Whether that displaced ordinary succession was contested for years, with conflicting High Court positions. The Supreme Court resolved it in December 2023 in Shakti Yezdani v. Jayanand Jayant Salgaonkar, holding that successors rather than nominees take absolute ownership, and that the nomination provisions cannot override the Indian Succession Act or the personal law applicable to the deceased. This matters beyond the shares themselves: it means guidance published, and advice given, before that date may rest on the position that was overruled. If your understanding of this came from something written earlier, it is worth re-checking rather than assuming it survived.

A 2015 amendment to section 39 of the Insurance Act introduced the beneficial nominee. Where the policyholder nominates a spouse, a parent or a child — or any combination of them — that nominee is beneficially entitled to the proceeds and keeps them as owner, rather than holding them for the heirs, unless it is proved that the policyholder could not have conferred such beneficial title having regard to the nature of their own title. Commentary distinguishes this beneficial nominee from a collector nominee, who is anyone else and who holds in the ordinary way. So the general rule and its most important exception point in opposite directions, and the exception applies to the asset that is most often the largest single sum a family receives. Getting this backwards causes a different dispute in each direction: treating an insurance nomination as a mere collection creates a fight that the statute had already prevented, and treating a bank nomination as beneficial creates one the statute does not.

Where there is no will, who the legal heirs are and in what shares they take is decided by the personal law applicable to the deceased rather than by one statute of general application: the Hindu Succession Act, the Indian Succession Act and Muslim personal law govern different people and produce different distributions. That is why the question 'who is my legal heir' has no general answer, and why a page like this one cannot supply it however much detail you provide. It also means a family's confident belief about how an estate will divide — usually formed from how a previous death in the family went — may be describing a different regime from the one that will apply.

The conclusion to avoid is that nomination is pointless. Its function is to give the institution a person it may lawfully pay, which is what allows an account to be released, a holding transferred or a claim settled without every institution first waiting for succession to be established. Without a nomination the family is left seeking the institution's own process for a death claim, which is materially slower. So nomination speeds up RELEASE while deciding nothing about OWNERSHIP, and the two are complementary rather than alternatives: keep the nominations current, and separately make a will, because only one of those two instruments decides who ends up with the asset.

Where heirs are outside India and the assets are inside it, the difficulty is usually procedural rather than legal. Establishing entitlement to the satisfaction of a bank, a registrar or a depository generally requires documents obtained in India, and where heirs cannot be present it requires somebody empowered to act for them — which is its own instrument with its own legalisation chain, as anyone who has executed a property transaction from abroad will recognise. None of that can be started at the point it is needed, and every institution runs its own process at its own pace. The useful thing to do while nothing has happened is to establish what each institution would actually require, and to make sure a will exists, since a clear testamentary instrument is what shortens the process that the family will otherwise be running from another country under time pressure and grief.

Everything above exists to correct one belief: that a completed nomination form has decided who inherits. It cannot tell you who your heirs are, because that turns on personal law and on facts this page does not have; it cannot tell you whether a particular nomination is beneficial, because that turns on the relationship and on the policyholder's own title; and it cannot tell you what any institution will require. What it can do is tell you that the question you thought was closed is open, early enough to do something about it — which for most families means making a will and keeping the nominations current, in that order of importance and both while there is no urgency.