Contents (18 chapters)
16. Family, Joint Finances and Succession
What can be held jointly, what cannot, and why a nomination is not a will.
Indian law does not treat a couple as a financial unit. EPF, EPS, NPS and PPF accounts are individual and cannot be jointly held; equity compensation is individual; bank accounts, demat accounts and mutual fund folios can be joint. Where liability is shared it is joint and several — each party owes the whole amount, not half of it.
The one thing here with irreversible consequences is that a nominee is a trustee, not an owner. A nomination determines who the institution may pay. It does not determine who is entitled to keep the money. Every other decision in this chapter can be revised later; that one takes effect at the point where you are no longer available to revise it.
16.1 Planning with a partner
Financial planning is hard alone and considerably harder jointly, because two people bring different timelines, priorities and possibilities. Money is among the most commonly cited sources of relationship breakdown.
Account structures
Three structures are common, and none of them solves the underlying problem:
| Structure | How it works |
|---|---|
| One account | Fully shared |
| Two accounts | Separate, with coordination on bill payment |
| Three accounts | Two personal plus one joint for shared expenses |
The core issue is communication and values, not account architecture. A useful convention that costs nothing: agree a rupee threshold above which any expenditure is discussed first.
What stays individual in India
- EPF, EPS and NPS accounts are individual. They cannot be jointly held.
- Equity compensation is individual.
- PPF accounts are individual, and the ₹1.5 lakh annual limit applies per individual; a couple can hold two.
- Bank accounts, demat accounts and mutual fund folios can be joint.
Joint liability
Being a co-borrower on a loan means joint and several liability for the whole amount, not half of it. Co-signing for anyone (spouse, parent, sibling, friend) makes their default your default, and their missed payment appears on your credit report.
Where a couple co-owns and co-borrows on a home loan, each may claim the full Section 22 and Section 123 limits independently, which is one of the few genuine tax advantages of joint ownership.
Clubbing of income
Income from assets you gift to your spouse, or to a minor child, is generally clubbed back into your income for tax purposes. Transferring investments to a lower-earning spouse does not shift the tax liability. Assets given to a major child or to parents are not subject to clubbing.
16.2 Nomination is not inheritance
The most consequential misunderstanding in Indian personal finance, and one that only surfaces at the worst possible moment.
A nominee is a trustee, not an owner.
A nomination determines who the institution may pay. It does not determine who is legally entitled to keep the money. The nominee receives the asset and holds it for the legal heirs as determined by succession law or by a will.
There are limited statutory exceptions (notably for certain insurance nominations to specified close relatives, and for shares under the Companies Act) where the nominee's position is stronger. The general rule holds for bank accounts, mutual funds, EPF and most other assets.
What follows
| Asset | Nominate where? |
|---|---|
| Bank accounts | Each bank |
| Fixed deposits | Each deposit |
| EPF, EPS, EDLI | EPFO e-nomination: covers all three |
| NPS | On the PRAN |
| Mutual funds | Each folio, or across folios via the registrar |
| Demat account | With the depository participant |
| Insurance policies | Each policy |
| PPF | At the post office or bank |
Succession without a will
If you die intestate, distribution follows statute:
- Hindus, Buddhists, Jains, Sikhs: the Hindu Succession Act, 1956
- Muslims: personal law
- Christians, Parsis and others: the Indian Succession Act, 1925
- Anyone who married under the Special Marriage Act, 1954: the Indian Succession Act
These outcomes may differ substantially from what you would have chosen.
A will
- Must be in writing, signed by you, and attested by two witnesses who are not beneficiaries.
- Registration is optional in India, but registering it reduces the scope for later dispute.
- Can be changed or revoked at any time while you are of sound mind.
- Probate is required in certain jurisdictions and circumstances.
A simple will costs very little and resolves an enormous amount. Most Indian engineers do not have one, and the most common reason given ("I do not have enough assets to need one") is usually already untrue by the time it is said, once EPF, NPS, equity and a flat are counted.
16.3 Checklist
- File a nomination on every account, policy, folio, PRAN and EPF record
- Understand that a nominee is a trustee, not an heir
- Write a will
- If you have a partner, agree the threshold above which expenditure is discussed