Want to ensure smooth succession of deposits? Get a joint account

Unfortunate demise of a loved one brings insurmountable loss to family members and takes good amount of time for them to come to terms with the new reality. However, one of the biggest pain areas for heirs remains accessing the bank deposits of the deceased person. Having a joint account with your loved ones can be a solution to many such deposit succession issues. Let us understand the difference between accessing funds from a solo account and a joint account after the death of the concerned accountholder.

What happens with account with sole ownership?

In case of the death of a sole ownership accountholder, the bank first checks whether the account has a nominee or not. If there is nomination the bank can transfer the proceeds to the nominee considering him or her to be the trustee of the legal heirs. However, the transfer happens only after a lot of paperwork in which the nominee has to produce his identity proof and death certificate of the deceased person. Beside, the bank also checks if there is any restricting order from a competent court against transferring the asset to the nominee. Although the RBI stipulates a time frame of 15 days for a bank to process the claim after it has received it, the bank cannot consider the claim complete until it has done suitable identification of the claimants. Therefore, the process takes longer to get completed.

In case the bank account does not have any nominees, the process gets much longer. All legal heirs have to first agree about the process to claim the deposit. Besides the death certificate of the deceased accountholder and proof of address and photo ID of the legal heirs, they have to produce legal representation, that is, succession certificate or letter of administration or probate granted by a competent court, which is a time consuming process. They will also have to give indemnity to the bank to make good the loss if their claim is found to be invalid or inadequate or there is any adverse ruling by the court later on.

What happens with joint ownership accounts?

Joint account in most of the cases allows smooth transition of funds to the surviving joint holder. Joint accounts are of different types and can be used for different purposes and situations as part of succession planning. A particular type of joint account, known as either or survivor, anyone or survivor clauses, allow unhindered access to all accountholders separately. However, if in an account the mode of operation is joint, then two or more account holders have to authorise together to access the funds. In restricted joint accounts such as 'former or survivor', or 'later or survivor' main account holder is allowed to operate the account till he/she is alive and others get the access to account only in case of death of the primary accountholder. Let us see how you can use different types of joint account for your succession planning.

When the access is open to all account holders, the surviving accountholders can freely operate their account. However, they will have to complete the legal process to get the account updated. "In case of 'Either or Survivor' and 'Former or Survivor' other accountholders can get the access to the account and funds shall be transferred to the survivor on meeting the required conditions including establishment of identity of the survivor, availability of the valid death certificate and no restraining order from the competent court," says Sameer Mittal, Managing Partner, Sameer Mittal & Associates LLP and Chairman, International Trade Council in India.

The restricted survivorship clause in the joint account comes in the form of 'former or survivor' and 'later or survivor'. "In case of joint accounts where one of accountholder dies and has opted for the survivor clause, payment of the balance in the joint account to survivor shall be considered as valid discharge of the liability of the bank subject to identify the survivor being established, valid proof of death of accountholder is produced and also provided that a competent court has not issued a restraining order to the bank for not making the payment to the survivor from the joint account,"says Mittal. So the process in case of joint account facilitates much smooth and timely access to funds when compared to solo account.

A good instrument for senior citizen to plan succession

For senior citizens having a joint account with spouse helps in meeting emergency funding requirement in case one of them faces a medical emergency. You can keep aside your emergency fund in a different account with your spouse and the operation of the account can be made as 'either or survivor' mode. Depending upon your family structure and comfort level you can also add your children by keeping any mode of operation of the account as 'anyone or survivor'.

Similarly, you can keep the funds in a joint account that you intend to give to your loved ones after your death. Depending upon your objective you can choose the control. If you are confident in sharing the full access with your spouse or your children, you can keep the mode of operation of the account as 'either or survivor' if two people are involved and 'anyone or survivor if more than two people are involved.

"It is better for the senior citizen to keep the succession funds in the joint account for easier transfer. The biggest advantage is that it provides access to money to both the holders whenever they need it. In case of death of one account holder, the other account holder can get the access to the funds if they have opted for the survivor clause," says Mittal.

However, if you wish to have full control over access to your deposits, you should keep the mode of operation as 'former or survivor' mode. It will help in a seamless transition of your bank account as it ensures you have full control on the fund until you are alive and once you are not around, ownership of the account is passed on to your joint account holder without much difficulty.