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Inherent in any asset investment is the expectation that it will pass on to your dependents - spouse, child or another person. Many people make these investments with the intention of protecting their dependents' future. You may forget to add a nominee to your trading account when you open it online.
The Demat account is where you store all of your financial assets. A trading account can be linked to it. This account allows you to make purchases and sell on the stock exchange. Your Demat account nominee will be also nominated to your trading account.
A nominee is someone who will legal hold the trading account, and any assets, in the event that the primary account holder dies. If the nominee is not mentioned in the account holder’s documents, the dependents of the primary account holder will need to complete grueling paperwork to gain access.
It is important to appoint a nominee to your online trading account immediately. Many brokerages assume that you have temporarily chosen not to nominate a nominee if you open an account online. If you decide to nominate, you will be able to add three names and specify how much each person will receive.
Brokerages are becoming more aware of the fact that account holders forget to add nominees to their trading or Demat accounts, or want to delay their registration. It is easy to nominate your dependent. The National Securities Depository Ltd. (NSDL), or Central Depository Securities Ltd. (CSDL) require brokers to follow the procedures.
Download the form to register nominees from the brokerage's website. Fill out all required details and sign the form. After making a photocopy, the account holder must mail the completed form to the broker. Some brokers will also accept an electronic signature, which can be sent back to them by e-mail. You have the option of changing who you nominate to your Demat account or adding more nominees by completing a nomination form.
If the account holder is unable to name someone to their trading account and dies, their legal heirs will be able to access the account by filing paperwork. It is important to know the difference between a legal inheritor and a nominee before we get into this process.
The law states that a person's legal inheritors have the right to their assets upon their death. A nominee is simply the person who has custody of the assets.
The two terms are often confused when it comes to Demat accounts, as depositories transfer the entire shareholding of the deceased account holder's nominees. It is best to name a person's legal heirs their nominees. A dispute could arise if the accounts holder dies.
Let's now see how legal heirs can access the assets of a deceased account holder.
The amount of securities that the account holder holds will determine the documents needed to transfer shares. This is because the process is different for securities below Rs 5 Lakhs and above Rs 5 Lakhs. Two documents are required for each procedure: a transmission request form from a broker or depository site and a notarized death certificate. A gazetted officer can also attest the death certificate.
If the nominee is the legal heir, they will only need to submit the transmission form, client master reports of the nominee's Demat accounts given by their Depository, and a notarized death certificate.
Legal heirs must file an inaffidavit and letter of indemnity for securities less than Rs 5 lakh. Depending on the situation, one or more of these documents may need to be filed. If only one legal heir applies to transfer shares, all other legal heirs will need to produce no objection certificates.
If the deceased has a shareholding exceeding Rs 5 Lakhs, a letter granting administration, succession certificate (issued in time by a court and takes some time to obtain) and a copy of the will may be required.
To receive the benefit of the transfer of shares, the nominee must have a Demat account. If the nominee is also a surviving owner of the joint account, they will need to open a new Demat account. If the nominee doesn't have an account they can open one with a depository to receive the shares.
It is important to register your legal heirs and other people you wish to add as nominees promptly. They will be able to avoid the hassle of obtaining important documents from a court, some of which may require them to go through a lot of red tape and delay. It will also prevent conflicts between your legal heirs and others who have a stake in your financial assets. This will make the transfer process smoother.