26/12/2015

What to do when a fixed deposit holder dies before maturity

Fixed deposits are a popular investment option especially among the retired citizens who live on regular income. To avoid uncomfortable situations and running around. investors and their family members should be aware of the claim process in case of death of the deposit holder. Death is a certainty and to avoid inconvenience of cumbersome process of claiming maturity proceeds of a fixed deposit, it is advisable to take care of this aspect right at the time of investing in a fixed deposit. But before that, let's understand the different options and the consequences, in which a fixed deposit investment can be held.

MODE OF HOLDING
Joint holding with “Anyone or Survivor” option This is the most preferred and convenient option for ensuring that survivors do not have to face any problem in claiming the deposit amount on maturity. If the first holder or the joint holder dies, the surviving holder has to inform the company about the same and submit a copy of death certificate. On receipt of the same, company will delete the name of the deceased deposit holder and the surviving person shall receive the proceeds on maturity. Please note that deposit does not become payable to surviving depositor on the date of death itself.

JOINT HOLDING WITH “EITHER OR SURVIVOR” OPTION
Under this option, if the first holder dies, then the survivor can claim the deposit amount on maturity by following the same procedure as explained above. However, if the second holder dies, first holder can request the company to delete the name of deceased joint holder and replace it with another name of his choice.

JOINT HOLDING WITH “JOINT HOLDING” OPTION
Under this option, deposit proceeds will be paid to the first holder only when both the joint depositors sign on the FDR as discharge of the same. However, in case of death of one of the joint depositor, the surviving depositor will be entitled to receive the proceeds by following the same procedure as explained above.

SINGLE HOLDING WITH “NOMINATION” OPTION
In case the deposit is held in a single name and one or more persons are nominated to receive the proceeds in unfortunate event of death of single depositor, the maturity proceeds will be paid to the nominee(s) as a Trustee(s) of the depositor. In case the single depositor has made a separate Will for settlement of his assets, the nominee(s) will be bound to honour that.

SINGLE HOLDING WITHOUT “NOMINATION” OPTION
This is the most risky and avoidable option as in case of unfortunate death, the survivors or the heirs of the deceased investor will have to complete several cumbersome formalities, like producing a Will or a Succession Certificate to claim the deposit amount.

TAXATION
The maturity proceeds will not be taxed in the hands of the final recipient as there is no estate duty in our country as per the current tax laws in force. However, the interest amount if any will be added to the recipient's income and will be taxed accordingly.

PREMATURE PAYMENT
It may be noted that deposit amount will be payable only on the date of maturity and not earlier on the date of death. However, the surviving person or the legal heir can request the company for a premature payment of the deposit and this is the prerogative of the company to accept or decline such request.

CONCLUSION
Choosing the right mode of holding goes a long way in making smooth transfer of money to one's heirs. Opt for the right mode and make proper nominations. Keeping your family members aware of the process too helps.

Source: Moneycontrol.com

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