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

Right from your mutual fund investments to stocks, insurance claims, salary, rental income, utility payments, equated monthly instalments etc., all of what you earn and spend comes and goes from your savings bank account. So it comes as no surprise that banks have laid down strict norms for operating a savings account. While it is good that there such restrictions, sometimes these turn out to rather painful and rigid.

Sample this: Recently, a 63-year-old day had to run pillar to post to access her comatose husband's bank account to fund his treatment and care. She eventually had to approach the Bombay high court to get herself appointed as his guardian, in the absence of any specific legal provisions to deal with the rights of such patients.

This is something nobody wants to go through. Therefore, read on to find how a savings bank account operates and how you can provide for a hassle-free charge of your account to your family.

Don't forget to file the nomination and update it whenever required
It is always a good idea to file a nomination at the time of opening a deposit account. It is a facility that is available to all account holders. It simplifies the procedure of settling claims of the deceased account holder for the nominee at the time of death or any time after that. K. A. Babu, head of digital banking at Federal Bank says, "A nominee is not essentially the legal heir. A nominee and legal heir can be different individuals. If there is no nominee, legal heirs become eligible for the money and final settlement."

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 won't insist on other documents like succession certificate or a legal heir document. Further, you can change the nominee at any point of time as long as your deposit account or locker is functional.

However, it should be noted that the bank will only give the nominee charge of the proceedings or money when the account holder dies. 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 situations it is better to open a joint savings bank account.

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

a) 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.

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. 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," says Babu.

Should you open a joint account?
As with everything, a joint account, too, has advantages and disadvantages. The biggest advantage is that 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.

A big drawback of a joint account is that it doesn't give you the sense of freedom over your finances.

Operation of bank accounts by old/sick/incapacitated customers
According to Reserve Bank of India (RBI) rules, 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.

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.

The larger picture
Speaking specifically about joint savings accounts , Suresh Sadagopan, founder, Ladder7 Financial Advisories, recommends that you choose the 'Either or Survivor' clause. However, he also suggests to look at the larger picture, i.e., having a power of attorney (PoA). "A PoA 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."

Crisis is unforeseeable, and to avoid financial hassles in such untoward situations you need to make sure that all the documentations are in place and are done in time. All of these facilities - nominations, survivor clause, and PoA - are all useful tools. Make sure you have them in place in your savings bank account to avoid heartaches in the future, especially during times when the last thing you want to do is run after bank officials. 

Source:Ecnomic Times