OPERATIONAL INSTRUCTIONS

Can your family members access your bank account during a crisis? Here’s what you need to know and do

May it be your Mutual Fund Investments to stocks, Insurance claims, Salary, Rental income, Utility Payments, EMIs etc., all receivables and payments made are routed through your Savings Bank Account.  It is clear, that banks brought in stringent norms in operating your Savings Account.  While it is a good move towards control of money flow and tracing, these also turn out to be very difficult and cumbersome sometimes.

For example, a Senior Citizen had to run around from one corner to another, to have access to her husband’s account for her husband’s treatment expenses. This compelled her to take the issue to the High Court to get herself appointed as the legal guardian due to the restrictions in operations of the account.  It is therefore essential that one should ensure to take some important steps well before putting themselves in to problems/difficulties.

FILE NOMINATION AND UPDATE IT WHENEVER REQUIRED:

Nomination is a facility made available to the customer at the time of opening of a deposit account.  This is available to all account holders.  This ensure settlement of claims of deceased account holders in the event of the account holder’s death.  Further,

1. The nominee need not be a legal ,heir of the account holder who can be different individuals. If there is no nominee the legal heirs become eligible for the money and final settlement.
2. The benefit of nomination is that in the event of death of an account or locker holder, the bank can release the money in the account or contents of the locker to the appointed nominee and will not insist on other documents like succession certificate or a legal heir document.
3. Further, one can change the nominee at any point of time as long as your deposit account or locker is functional.
4. It may be noted that the nominee steps in to the shoes only in the event of the death of the account holder.
5. If the account holder is, say on life support or in a coma, the bank will not give the charge to the nominee.

To tide over such a situation better open a joint savings account

1. Joint savings account
   A joint savings bank account comes with a survivor clause and can be classified into the following categories:

   Either or survivor:
   In this type of mandate, both the account holders can operate the deposit account and will have complete charge. Here, signature of both the depositors is not required. For instance, if husband and wife hold an ‘Either or Survivor’ account, either of them can fully operate it in the absence of the other.

   Former or survivor:
   In this case, the ‘Former’, i.e. the first holder, alone can operate the account, when both the depositors are alive. Signatures of both the depositors have to be obtained, if the deposit is to be paid before maturity. In case of death of the first holder, the ‘Survivor’ or the second holder will get charge of the account. However, before taking charge of the account, the survivor will have to furnish the requisite documentary evidence such as proof  of death of the first holder.

   “Here, the second holder gets the charge of account under two circumstances: if the first holder passes away or both the holders give a joint application to change the mandate. If the primary holder is alive, the bank is not legally authorised to give charge to the second holder. In such cases only if a decree from a court is obtained, can the bank can act accordingly,”

Should you open a joint account?
Like other accounts, a joint account, too, has its own advantages and disadvantages.

The  advantage is

• it provides access to money to both holders whenever they need it, and for couples, especially, a joint account makes it easier to keep a track of their finances.
• Another advantage is that in a joint account even if you have filed a nomination and have chosen the ‘Survivor’ clause, the bank will give the charge of the account to the survivor and not to the nominee. The nominee will be eligible for the proceedings only after both holders die and the survivor will supersede the nominee for settlement in this mandate.

The disadvantage  of a joint account is

• That it does not give you the sense of freedom over your finances.

2. Operation of bank accounts by old/sick/incapacitated customers
   According to Reserve Ba nk of India (RBI) guidelines, an account holder who is too ill to sign a cheque or cannot be physically present in the bank to withdraw money can use his thumbprint on the cheque or withdrawal form. This should be identified by two independent witnesses known to the bank, one of whom must be a bank official.
   
   Similarly, incapacitated people who can’t be physically present in the bank and can’t give a thumb impression, can use a mark (it can be a toe impression or a mark which anybody can put on behalf of the person who has to sign), which should be identified by two independent witnesses one of whom should be a bank official.
3. Settlement of claims of missing peeople
   When it comes to a missing person, presumption of death can be raised only after a lapse of seven years from the date of his/her being reported missing. In such cases, the nominee or legal heirs are required to raise an express presumption of death of the account holder before a court.

   RBI has advised banks to formulate a policy, which would enable them to settle the claims of a missing person after taking into consideration legal opinion and taking into account facts and circumstances of each case. So the procedure of settlement may vary from bank to bank.

SUGGESTIONS:

Financial Advisories recommend that

• you choose the ‘Either or Survivor’ clause. However, a POA (Power of Attorney) empowers a person to perform certain acts on behalf of the other person, irrespective of his medical or physical fitness.
• Besides, this covers different classes of estate planning like movable and immovable assets and is a more useful tool.

CONCLUSION:

• Crisis is unforeseeable, and to avoid financial hassles in such untoward situations one should make sure that all the documentations are in place and are done in time.
• All of these facilities – nominations, survivor clause, and PoA – are useful tools. Make sure you have them in place in your savings bank account to avoid future issues, especially during times when one is forced is run behind the bank officials for a quick solution to the issues encountered.