Appointing A Nominee To Your Demat Account Is Crucial!
If you are interested in reaching your financial goals, the Indian stock market offers numerous opportunities. To invest in the stock market, you need trading and demat accounts. When you fill out the forms to open these accounts, you will also need to fill up the nominee section. Many people overlook this part of the form filling, especially young investors. However, appointing a nominee to your demat account is important and you should not ignore it.
If you ignore assigning a nominee to your demat or trading account, claiming ownership of the shares, bonds, and other securities will be difficult for your legal heirs. It will be a long and convoluted process that can be quite stressful for your family. You do not want to put your loved ones through this ordeal.
As mandated by SEBI, all brokerages offer the facility to appoint a nominee. Unfortunately, a majority of investors do not make use of it. You will find that nearly all depository participants constantly remind investors through emails to appoint nominees so that they can prevent complications from arising in case of any eventuality.
Importance of Nomination
While many investors spend a lot of time understanding how demat account works, not many give a second thought to the nomination. The person you nominate does not have to be your legal heir. It could be anyone even outside your family. The nominee will function as a trustee of the securities you hold and that will allow them to then transfer the assets to your legal heirs.
On the other hand, if you nominate a family member, who is your legal heir, it will ensure that your wealth is transferred smoothly and without a hassle, once you are no more. That is one of the main reasons that you should never ignore it.
When a Person Passes Away without Assigning a Nominee
If a person is the only account holder and passes away without registering a nominee with the brokerage, the transfer of assets becomes a complicated process. Should this happen, the family members would have to go through court to be appointed as their legal heirs or get a court-mandated certificate of succession.
In addition to this, the survivors of the deceased person would also have to submit a number of other documents like:
- Death certificate, which has to be notarized by a notary
- Affidavit
- Letter of indemnity
- No objection certificate from all the legal heirs
These documents have to be submitted to the brokerage and after proper verification, the brokerage then will allow access to the demat account and the securities held within it. As you can see, the process of getting access to the securities after the account holder dies is quite complex and time-consuming. Hence, registering a nominee is something you should do without fail if you have a demat account.
It is prudent to remember that when you do nominate a person or multiple people, your family will be able to get access to the shares and withdraw them from your demat account. Getting a succession certificate from the court is not just time-consuming but also expensive. You do not want to put your family through the stressful process of getting the certificate. The legal process can lead to unnecessary delays and during that period, the value of your shares and other securities could diminish. That will be counterproductive to the plans you may have made to build wealth.
In Conclusion
As you can see, nothing is more important than registering a nominee. You should not relax assuming that your legal heirs can easily get access to your demat account after you pass away. You can register up to three nominees and when you do it, the securities in your demat account will be transferred to their accounts. This transition happens seamlessly when you appoint a nominee.
