• Though nomination is not mandatory for a demat account, it is highly recommended so that the financial assets of the account holder can be transferred quickly and seamlessly with minimum paperwork to the nominee's demat account
When Milind Johri was barely 25 years old, he opened a demat account and trading account. At that time he did not mention any nominee for his demat account holdings.
A few years later, he married Deepa, an architect by profession, who only did odd jobs when she had time, as she was too engrossed in raising her children and managing her household.
Being the primary earner, Milind managed the finances for the family and the couple found little or no time to discuss money matters. Sometimes, though, he would proudly tell her how his portfolio of stocks and mutual funds was already large enough to put his kids through college.
One unfortunate day, Milind meets with an accident. After an initial grieving period, Deepa begins to evaluate her finances so that she can give her children the life she and Milind had planned for them.
When she contacted Milind's stockbroker, she was astonished to hear how much he had accumulated in his demat account in stocks and mutual fund holdings. However, she was disappointed to find that since there was no nominee in the account, she could not easily access those securities.
The broker explained to him that nomination is a process by which Milind, or any holder of securities in the demat account, informs about his preference regarding receiving his securities in the unfortunate case of his death. He had the opportunity to declare the nomination at the time of opening his demat account or any time thereafter. But unfortunately, he didn't.
As a demat account holder, he was only required to mention the information regarding the nominee(s) in the account opening form at the time of opening the account. In fact, he could nominate three different persons with the proportion (%) in which the securities could then be transferred to his demat account.
Perhaps he missed the opportunity to nominate someone while opening the account because he was in a hurry. However, he can declare his nomination any time thereafter by simply filling up the nomination form and submitting it to his Depository Participant (DP).
Although he was unmarried at the time of opening the account, even if he had nominated his parents at that time, he had the option to change the nomination to his wife or anyone else at any time. All they need to do is fill the nomination form once again, stating their new nominee and submit it to their DP.
Deepa was finally able to access her husband's stock holdings, but it took a lot of time and effort, as he had not nominated her.
The lesson is that though nomination is not mandatory for a demat account, it is highly recommended so that the financial assets of the account holder can be transferred quickly and seamlessly with minimal paperwork to the nominee's demat account.
Other facts about nomination in demat account that may interest you:
• Nomination is allowed for accounts with joint holders. In case of death of any joint holder, the securities shall be transmitted to the surviving holder. However, if both the joint holders die, the securities will be transmitted to the nominee on nomination; If not, the legal heir will have to follow a process to access the holdings.
• If an account holder does not want to mention a nominee while opening the account, he/she can opt out of nomination.
• Nomination can be made only by persons holding the demat account, either singly or jointly, and only persons can be nominees. Non-individual holders such as societies, trusts, body corporates, partnership firms and Hindu undivided families may or may not be nominated.
• NRIs can enroll directly. However, the Power of Attorney holder cannot nominate on behalf of the NRI.
• Minors cannot enroll either directly or through their guardians. However, a minor can be a nominee of the demat account.
• In case of death of the account holder, all the securities lying in the demat account can be transmitted to the nominee(s) in the pre-registered proportion.
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