Fixed deposits, like all other investment options, help you multiply your money. If you open a fixed deposit account with a bank, an NBFC, or with the Indian Postal Service, you can rest assured that your money will continue to generate guaranteed interest over the investment tenure. This is one of the key reasons many investors are drawn to the FD as an investment option.

However, what happens to the money deposited if the depositor passes away? That is an important question that every investor needs to know the answer to before investing in fixed deposits. So, let’s take a look at the due process in case of the depositor’s death.

What happens in case of single holding?

Once you’ve found the best FD to invest in, you can choose to open the account in your name alone, or along with another person, like your spouse or parent. The former, where the deposit is held in the name of one individual alone, is a case of single holding. So, what happens to single holding FDs in case of the depositor’s death?

If the FD holder had assigned a nominee before his passing, then the funds are passed on to the nominee assigned. In case there is no nomination made, then the legal heirs of the FD holder are entitled to receive the funds in the fixed deposits.

What happens in case of joint holding?

Jointly held FDs are basically fixed deposits where there is more than one holder. In this case, there are different clauses that may be applicable. Let’s take these up one after the other and see how the FD funds are passed on in each case.

1.      Either or Survivor clause

What happens if a couple has a fixed deposit account, and one of them dies before the other person? In this case, the bank will pay the final balance to the surviving spouse. The final balance will include the initial investment amount along with the interest generated thereon.

2.      Former or Survivor clause

In joint accounts that have two holders, a ‘former or survivor clause’ means that only the first account holder is allowed to withdraw funds from the FD. In case the first holder dies, the second account holder gets the authority to withdraw funds. In case of both the depositors’ demise, the nominee gets the money.

3.      Latter or Survivor clause

This clause operates just like the ‘former or survivor clause.’ The only difference is that the second account holder has the initial authority. Upon their death, the former account holder can withdraw funds.

Conclusion

So, the bottom line is that nomination is an important part of the FD account opening procedure. If you’re interested in opening a fixed deposit, you can find the best FDs on Finserv MARKETS. The account opening procedure is also extremely easy. Take a look at the options available and make the best choice for your life goals.

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