Joint Bank Accounts, Nominees and Shared Investments: What Spouses Should Know About Ownership

Short answer: being a joint holder, a nominee, and a legal heir are three different legal positions. A person can occupy one, two, or all three at once, but the legal consequences aren’t identical — and which one controls the money depends on the specific asset (bank deposit, mutual fund, demat holding, or life insurance policy), not on a single universal rule.

Quick reference: ownership, nomination and succession

Concept

What it generally determines

Account holder / joint holder

Relationship with the account and operational rights during the holders’ lifetime

Nominee

Who the institution pays or transmits the asset to first after death — not automatically who owns it (life insurance is a partial exception)

Will

Governs testamentary succession where applicable; its interaction with a nomination depends on the specific statute and asset, not a single rule

Legal heir

Entitlement to inherit under the applicable succession law, where there is no valid will

Source of funds

Key evidence in beneficial-ownership disputes between spouses, including during divorce

 

The legal framework, asset by asset

There’s no single statute governing “who owns a joint account or investment.” The position differs by asset class, and the rules for both banking and securities nomination were significantly revised in 2025 and again in 2026.

Bank deposits

Nomination for bank deposits is governed by Section 45ZA of the Banking Regulation Act, 1949. The Banking Laws (Amendment) Act, 2025 allowed a depositor to nominate up to four people, effective 1 November 2025 — simultaneously, with a specified percentage share each, or successively, in order of priority under the newly inserted Section 45ZG.

Separately, for joint accounts with a survivorship mandate (“Either or Survivor,” “Former or Survivor,” and similar), RBI’s guidance is precise on a point that’s easy to get wrong: payment to the survivor discharges the bank’s liability, but the survivor holds that money only as a trustee for the legal heirs (who may include the survivor) — unless the survivor is the sole beneficial owner of the balance or the sole legal heir. In other words, the bank can safely pay the survivor, but that payment doesn’t by itself resolve who is beneficially entitled to keep the funds. This is reinforced by the RBI’s Settlement of Claims of Deceased Depositors framework, most recently updated in 2025-26.

Mutual funds and demat holdings

These are governed by SEBI’s nomination framework, which has changed twice in quick succession. SEBI’s circular of 10 January 2025 first allowed up to ten nominees; a further circular dated 29 May 2026 (effective 1 September 2026) revised this down and supersedes the earlier framework. Under the current rules:

Investors may nominate up to three people per demat account or mutual fund folio.

Nomination is now mandatory for new single-holder accounts opened on or after 1 September 2026, unless the investor files a formal opt-out.

Nomination remains optional for jointly held accounts and folios, and adding or changing a nominee on a joint holding requires the consent of all joint holders.

If percentages aren’t specified across multiple nominees, holdings are divided equally.

Critically, joint holdings and sole holdings with a nominee are not treated the same way. Where one joint holder in a mutual fund folio or demat account dies, SEBI’s framework provides for the assets to transmit to the surviving holder(s) by name deletion, with the surviving holder(s) inheriting as owners of that holding — a more direct transmission than the “trustee for legal heirs” position that applies to bank survivorship accounts and to nominees generally. A sole holding with a named nominee works differently: the nominee receives the asset from the institution, but the deeper question of who is beneficially entitled to it is still governed by succession law or a will, subject to the Supreme Court authority discussed below.

Life insurance

This is the area where nomination comes closest to creating outright ownership — but the rule is a rebuttable presumption, not an absolute. Section 39(7) of the Insurance Act, 1938, inserted by the Insurance Laws (Amendment) Act, 2015, provides that where the nominee is the policyholder’s parent, spouse, or child (or any of them), that nominee is “beneficially entitled” to the payout — unless it is proved that the policyholder, given the nature of their title to the policy, could not have conferred that beneficial title. Section 39 separately allows a policyholder to change or cancel a nomination by a later will before the policy matures. The interaction between a beneficial nomination under Section 39(7) and a subsequent will has generated genuine litigation and isn’t fully settled by a single Supreme Court ruling, so it shouldn’t be reduced to a flat statement that “the will always wins.” For nominees outside the parent/spouse/child category, the older trustee position from Sarbati Devi continues to apply.

Succession law

Where there’s no will, the Hindu Succession Act, 1956 (or the Indian Succession Act, 1925, or the relevant personal law for other communities) decides who inherits. Where there is a will, it generally governs the deceased’s estate — but a will still operates within the framework of the applicable succession statute and doesn’t automatically override every asset-specific nomination rule discussed above.

Matrimonial property

India does not have a comprehensive statutory matrimonial-property regime under the Hindu Marriage Act comparable to community-property systems elsewhere. Section 27 of the Hindu Marriage Act, 1955 gives a family court a narrower, specific power: in a proceeding under the Act, the court may decide “just and proper” arrangements for property that was presented to the couple at or about the time of marriage and belongs jointly to both spouses. That’s a fairly specific category — gifts around the time of the wedding that are jointly owned — not a general rule that all bank accounts or investments acquired during a marriage are split by contribution. Ownership disputes over bank accounts, securities, and other investments during a divorce depend on the nature of the asset, whose name it’s held in, the source and circumstances of acquisition, any contractual terms, and the specific relief sought in the proceeding — rather than one formula that applies across the board.

What the Supreme Court has actually held

Two decisions form the core authority here, and each should be read for exactly what it decided rather than folded into one blanket rule:

Sarbati Devi v. Usha Devi, (1984) 1 SCC 424 (AIR 1984 SC 346) — decided under the *then-existing* Section 39 of the Insurance Act, 1938, before the 2015 amendment. The Court held that a nominee does not get beneficial ownership of the policy proceeds to the exclusion of the legal heirs; the nominee receives the money but holds it for those entitled under succession law. This is the origin of the “nominee as trustee, not owner” principle, later applied by analogy to shares, bank deposits, and other assets. It does not, by itself, describe the current position for a spouse, parent, or child nominee under the post-2015 beneficial-nominee category.

Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar & Ors., (2024) 4 SCC 642 (Civil Appeal No. 7107 of 2017, decided 14 December 2023) — the Court held that nomination under the Companies Act and the Depositories Act does not create a separate, third mode of succession that overrides a will or the ordinary law of succession. The nominee’s role is to represent the estate and receive the asset, not to inherit it outright to the exclusion of legal heirs.

The general proposition that follows from both cases — nomination facilitates who receives an asset first, without by itself deciding who is beneficially entitled to keep it — still has to be checked against the specific statute and asset class, since post-2015 life insurance and joint SEBI-regulated holdings both work differently from the general rule in identifiable ways.

Who this actually affects

Spouses opening a joint account or investment during the marriage — the mode of operation decides who can transact; it doesn’t by itself decide ownership of the underlying funds.

A surviving spouse after the other’s death — whether they were a joint holder, a nominee, or both changes what they can do with the account and how quickly, and the answer differs between a bank account, a mutual fund/demat joint holding, and a sole holding with a nominee.

A spouse going through separation or divorce, where jointly held accounts and investments become contested assets and the source of funds, title, and specific relief sought become central.

Legal heirs who were never named as nominees — under Sarbati Devi and Shakti Yezdani, they don’t lose their inheritance claim to a bank, mutual fund, or demat nominee just because someone else was named, though the position is different for a beneficial nominee under life insurance.

Documents and evidence that matter

Account opening forms and the mode-of-operation instructions on file with the bank

Nomination forms for each bank account, mutual fund folio, and demat account, including the percentage share where multiple nominees are named

Bank statements and transaction history showing who actually deposited the money

Salary slips, income tax returns, or other proof of the source of funds for each spouse

A registered will, if one exists

Succession certificates or legal heirship documents, where funds are being claimed by legal heirs rather than a named nominee

Where the process usually goes wrong

The most common misconception is treating nomination as a substitute for a will across every asset. It isn’t, outside the specific beneficial-nominee category for life insurance, and even there the rule is a rebuttable presumption rather than an absolute. Families that treat nomination as their entire estate plan often end up in exactly the dispute this is meant to avoid.

The second common mistake is assuming a joint account or investment passes automatically and entirely to whichever holder survives, on identical terms across every asset type. It doesn’t work the same way everywhere: a surviving bank account holder typically gets a valid discharge from the bank but holds the funds on trust for the legal heirs unless they’re the sole heir, while a surviving joint holder on a mutual fund or demat account generally inherits that specific holding outright under SEBI’s current transmission framework.

The third is assuming that a change in marital status — marriage, divorce, remarriage — automatically updates or cancels an existing nomination. It doesn’t reliably do so across every statute and product; the effect depends on the specific law and contract terms governing that asset. Rather than assume, it’s worth formally reviewing and, where appropriate, re-filing nominations after any major change in circumstances — something the recent banking and SEBI reforms have made procedurally easier by simplifying the forms and allowing changes to be made any number of times.

Frequently asked questions

Does my nominee automatically get the money in my bank account after I die?

Not as outright owner. The bank can validly pay the nominee or survivor, but outside the specific circumstances where that person is also the sole legal heir, they generally hold the funds for the benefit of all the legal heirs under succession law or a will.

Does a joint account make both spouses equal owners?

Not necessarily. Joint holding establishes the account relationship and operating rights, but beneficial ownership can still depend on the terms of the account, who actually contributed the funds, and the applicable law — this is exactly the kind of question courts look at during a divorce or an inheritance dispute.

What happens to a joint demat account or mutual fund folio when one holder dies?

Under SEBI’s current framework, the assets transmit to the surviving holder(s) by name deletion, and the surviving holder(s) inherit that specific holding as owners — this is a more direct transfer than the trustee position that applies to bank survivorship accounts.

Can I just skip writing a will if I’ve already added nominees everywhere?

Not safely. Nomination and a will serve different legal purposes, and outside the life-insurance beneficial-nominee category, a nominee is generally not the final word on ownership. Without a will, succession law decides who inherits, regardless of who was nominated.

Are joint bank accounts split equally during divorce?

Not automatically, and not under a single Hindu Marriage Act formula. Section 27 of the HMA covers a narrower category — property presented at or about the time of marriage that’s jointly owned. Beyond that, courts look at the specific facts: whose name the asset is in, who funded it, and what relief is actually being sought.

How many nominees can I name now?

It depends on the asset and has changed recently. For bank deposits, up to four, since 1 November 2025, under the Banking Laws (Amendment) Act, 2025. For demat accounts and mutual fund folios, up to three, since SEBI’s circular dated 29 May 2026 (effective 1 September 2026), which superseded the earlier 2025 framework that had allowed up to ten.

Is a nominee on a life insurance policy treated differently from a bank or mutual fund nominee?

Generally yes, if the nominee is a spouse, parent, or child. Since the 2015 amendment inserting Section 39(7) of the Insurance Act, 1938, such a nominee is presumed beneficially entitled to the payout, unless it’s shown the policyholder couldn’t have conferred that title. That presumption doesn’t extend to other nominees, or to bank, mutual fund, or demat nominees generally, who remain trustees for the legal heirs.

When to consult a lawyer

This is general legal information, not advice for a specific situation, and the rules in this area have changed more than once in the last eighteen months. It’s worth speaking to a lawyer before assuming how a joint account, nomination, or shared investment will be treated — particularly if a divorce or separation is underway, if a spouse has died without a will, if in-laws or other relatives are disputing a nominee’s claim, or if significant sums are involved and no estate planning exists yet. A family law or succession lawyer can also help draft or update a will so that nominations, joint holdings, and inheritance actually work together.

Related reading on Lawvaani: nominee and legal heir under Indian law · Hindu Succession Act and intestate inheritance · beneficial nominee under Section 39 of the Insurance Act · Section 27 of the Hindu Marriage Act · joint bank account after death · Supreme Court’s decision in Shakti Yezdani.