We all know that our savings bank account is really valuable and important because all our earnings like our salary, income from stocks, mutual funds etc. all come directly into this account. That’s why the bank has strict rules for those who can access your account.
But sometimes in case of an emergency, your family members might need to access your account. What happens then? We have listed 2 ways in which a family member can access your bank account:
1. Through Nomination:
When you fill the form to open a bank account you will find a blank space which asks for Nominee name. In this blank you can fill up any of your family member’s name (daughter, son, wife etc.). In case of death of the account holder the whole amount would be given to the name mentioned. The facility is available to all account holders. You can change the nominee name whenever you feel to as long as your deposit account is functional.
A nominee may not necessary be the legal heir to your money. For e.g. Your nominee could be your wife but your legal heir might be your son. If there is no nominee then the legal heir become eligible for the money. The advantage a nominee has over legal heir is that in case of death of an account holder, the bank can release the money in the account of the appointed nominee directly without asking for documents like succession certificate or a legal heir document.
But the disadvantage is that the money only gets released after the death of the account holder. What if your family member needs to access your account when you’re alive and need help? Then there is another way in which your family can do this:
2. Through a Joint Account:
Joint savings account is when there are two account holders to one bank account. There are 2 types of Joint Accounts:
a) Either or Survivor: In this type, both the account holders can operate the deposit account and will have complete charge.
b) Former or Survivor: In this case, the ‘Former’, i.e. the first holder, alone can operate the account, when both the depositors are alive. In case of death of the first holder, the ‘Survivor’ or the second holder will get charge of the account.
If you’ve filled a nomination form then in case of death of an account holder the bank will give charge of the account to the survivor and not to the nominee. The nominee will be eligible for the account only after both holders die
Which clause is better to opt for “either or survivor” or “former or survivor”?
The clause that is more preferred is “Either or Survivor” because:
Because any one of the account holder can use it while in latter the survivor can use the account only after the death of its partner.
2. Both can access the account and transfer the funds.
3. The survivor can opt to continue the account.
Whats better: Joint Account or a Nominee?
Joint account is useful for a more operational point of view for the following benefits:
- It makes funds accessible to all holders which is not possible with a single holding account. This helps if one holder is unwell or in the hospital and cannot access her account.
- It helps to keep a check on the usage of funds and inculcate financial discipline. For example: A mother wants a joint account with her young daughter to teach her about money.
- It prevents impulsive spending because at the end with a joint account both holders have financial responsibility over it.
- It helps save taxes in some cases. For example: If a couple wants to buy a house jointly opening a joint account is the first step. This ensures that the deed is in the name of both and EMI deductions can be claimed by both in their respective shares while calculating the tax
Pro Tip: Though there are many ways in which a person can use a joint account to reduce his or her tax liability one must get in touch with a CA for getting advice on these benefits.
Nomination account is useful from the point of view of having financial freedom as there is no other holder. Its an alternative to a joint account. But experts suggest joint accounts over nominee as it is easier to transfer the account in case of death and joint account comes with the above listed benefits.
If you have any more questions on how your family can access your account, comment and let us know.