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20 February 2026
6 min read

# Nominee vs. Heir: Why Every Indian Muslim Family Must Know the Difference

The Supreme Court of India has been clear — a nominee is a custodian, not an owner. Yet millions of Indian families lose their rightful inheritance because of this misunderstanding.

## The Nomination Misconception

One of the most consequential misunderstandings in Indian personal law is the conflation of nomination with ownership. When you nominate someone on your bank account, insurance policy, or mutual fund folio, you are appointing a custodian — not transferring ownership. The Supreme Court of India has established this principle through multiple landmark judgments, including Sarbati Devi v. Usha Devi (1984) and Shakti Yezdani v. Jayanand Jayant Salgaonkar (2017).

## How This Affects Muslim Families

Under the Muslim Personal Law (Shariat) Application Act, 1937, inheritance for Indian Muslims is governed by Islamic law, not the Indian Succession Act. This means a deceased Muslim's estate must be distributed according to Faraid (Quranic inheritance rules), regardless of who is named as nominee. In practice, however, banks and insurance companies routinely release assets to nominees without verifying inheritance rights. This creates a situation where one family member — often a son or spouse — receives all assets while other Quranic heirs receive nothing.

## The Legal Position: Supreme Court Precedent

The Supreme Court has consistently held that nomination is a convenience mechanism for quick disbursement, not a testamentary disposition. The nominee holds assets in trust for the legal heirs. This means: (1) A nominee on a bank account must distribute the balance to all heirs per Faraid. (2) An insurance nominee holds the proceeds as trustee, not as absolute owner. (3) Mutual fund nominations do not override inheritance law. Despite these clear legal principles, enforcement remains inconsistent across states.

## Protecting Your Family's Quranic Rights

The solution is proactive estate planning. A properly executed Islamic will (Wasiyyah) clearly establishes the Faraid distribution, identifies all heirs and their shares, and provides executors with the legal authority to ensure correct distribution. Wasiyat generates court-ready documents with state-specific execution packs, making it harder for any single nominee to misappropriate the estate.

## What You Should Do Today

First, review all your nominations (bank, insurance, mutual funds, demat) and understand that these are not substitutes for a will. Second, create an Islamic will that explicitly addresses how nominees should distribute assets to heirs. Third, inform your family members about the legal distinction. Fourth, ensure your executor understands their responsibility to enforce Faraid distribution. The cost of doing nothing is that your family's Quranic inheritance rights may go unfulfilled.

Disclaimer: This article is for educational purposes only and does not constitute legal or religious advice. For guidance specific to your situation, consult a qualified Islamic scholar or attorney.

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