Spend a little time in demat nomination to save effort for your loved ones

Spend a little time in demat nomination to save effort for your loved ones


A few years later, he married Deepa, an architect by profession, who took up only small assignments whenever time permitted, since she was quite engrossed in raising their children and managing their home.

Being the primary breadwinner, Milind managed the finances for the family and the couple found little or no time to discuss money matters. Sometimes, however, he would proudly tell her how his portfolio of stocks and mutual funds was already large enough to put their children through college.

One unfortunate day, Milind met with a fatal accident. After the initial mourning period, Deepa set about evaluating their finances, so she could proceed to give her children the life that she and Milind had planned for them.

When she contacted Milind’s stockbroker, she was amazed to hear how much he had amassed in stock and mutual fund holdings in his demat account. However, she was dismayed to know that since the account did not have a nominee, she could not access those securities easily.

The broker explained to her that nomination is a process by which Milind, or any holder of securities in a demat account, communicates their preference regarding who should receive their securities in the unfortunate case of their demise. He had the opportunity to declare a nomination at the time of opening of his demat account or any time later. But unfortunately, he had not.

As a demat account holder, all he had to do was mentioned the information related to nominee(s) in the account opening form at the time of account opening. In fact, he could have nominated up to three different individuals with proportion (%) in which securities in his demat account could be transmitted after him.

Perhaps he had overlooked the opportunity to nominate someone at the time of opening the account, as he was in a hurry at that time. However, he could have declared his nomination any time after that, simply by filling in a Nomination form and submitting it to his depository participant (DP).

Although he was unmarried at the time of opening his account, even if he had nominated his parents at that time, he had the option to change the nomination anytime, to his wife or anyone else. He would just have to fill up the Nomination form once again, stating his new nominee(s) and submit it to his DP.

Deepa was finally able to access her husband’s stock holdings, but it took a considerable amount of time and effort, since he had not nominated her.

The lesson is that although nomination is not mandatory for demat account, it is highly recommended so that the financial assets of the account holder can be transferred to the nominee’s demat account quickly and seamlessly, with minimum paperwork.

Other facts about nomination in demat account that may be of interest:

• Nomination is permitted for accounts with joint holders. In case of the death of either of the joint holders, the securities will be transmitted to the surviving holder. However, if both joint holders die, the securities will be transmitted to the nominee(s), if there is a nomination; if not, the legal heir will have to follow a process to access the holdings.

• If an account holder does not wish to mention any nominee at the time of account opening, he or she can simply opt out of nomination.

• Nomination can be made only by individuals holding demat accounts, singly or jointly, and only individuals can be nominees. Non-individual holders like societies, trusts, body corporates, partnership firms and Hindu Undivided Family cannot nominate or be nominees.

• NRIs can nominate directly. However, the power of attorney holder cannot nominate on behalf of an NRI.

• Minors cannot nominate either directly or through their guardians. However, minor can be a nominee in the demat account.

• In case of death of account holder, all the securities lying in the demat account, are liable to be transmitted to nominee(s) in the pre-registered proportion.

Samar Banwat is the Executive Director, NSDL

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