What To Do When A Fixed Deposit Holder Dies Before Maturity?

Posted by Divya Kapoor on June 12th, 2019

Fixed deposits are a popular low-risk investment option, especially among the senior and retired citizens. A fixed deposit can help your wealth grow and finance your life post-retirement.

However, in case of the untimely death of the holder before the maturity of the fixed deposit, here’s what you and your family should know about claiming the fixed deposit.

Firstly, the procedure you’ll undertake will depend on the type of account. Below are the types of account and other things to know and consider.

ACCOUNT TYPE:

 Joint holding with (Anyone or Survivor) option:

It is the most convenient option because it ensures that survivors don’t face any problems while claiming the deposit amount on the date of maturity. If the joint holder or the first holder of the fixed deposit dies, the surviving holder must inform the bank or financial institution about the same, and he/she should submit the copy of the death certificate. After the submission of the copy of the death certificate, the name of the deceased deposit holder will be removed by the bank or financial institution, and the survivor will receive the proceeds on maturity. However, the deposit does not become payable to the survivor on the date of death itself.

Joint holding with (Either or Survivor) option

In this type of account, if the second holder of the fixed deposit dies, the first holder can request the bank or financial institution to remove the name of the deceased joint holder and replace it another name of his choice. Other than this, the procedure is the same as explained above.

Joint holding with (Joint Holding) option

In a joint holding with a joint holding option, if any of the joint depositors dies, then the surviving depositor will receive the proceeds by following the procedure as explained in the first point. However, if both the depositors are alive, then the first holder will receive the deposit proceeds only when both the joint depositor sign on the FDR.

Single holding without (Nomination) option

It is considered to be one of the riskiest options available. If the depositor dies, then the survivors or the heirs of the deceased depositor will have to go through a pile of formalities such as producing a Succession Certificate or a Will to claim the deposit amount.

Single holding with (Nomination) option

In this type of account, the deposit is held by an individual depositor, and one or more persons can be nominated to receive the deposit. If the depositor dies, then the maturity amount will be paid to the nominee(s) mentioned by the depositor.

PREMATURE PAYMENT

The deposit amount can only be withdrawn on the date of maturity. You cannot withdraw the deposit amount on the date of death. However, the legal heir or the surviving person can request the bank/company or financial institution for premature payment of the deposit, and it depends on the bank/company or financial institution to accept or reject such request.

TAXATION:

Even though the maturity proceeds are not taxable, the interest amount added to the recipient’s income may or may not be taxed.

Generally, the process that you will have to follow will include the following steps :

1. Get in touch the FD provider and get information about the account type

2. Organize and submit the relevant documents. These include:

- Claim form

- Death certificate

- Succession certificate

- Indemnity bond

3. Decide whether to continue with the FD or liquidate it. Bear in mind that while you may want to liquidate the FD before the lapse of the tenor, the final decision rests with the fixed deposit provider.

So, in case of any unfortunate event, you can follow the guide mentioned above to withdraw the FD.

As an investor, to make this process easier, always be aware of the type of account that you are choosing. Always choose a trusted family member as the nominee and make sure to inform them about the terms and conditions of your FD. It is also advisable to keep a record of all your investment and bank details in one place so that your family can easily access all the information when they need to.