As more and more investors open trading accounts online, a trend which broking houses are increasingly noticing is of most new traders forgetting to add a nominee, or seeking to delay the process. To appoint a nominee, an individual must download a form, fill it up, sign it, and courier the physical form back to the broker.
Many tend to delay the process, and it can create problems for the legal heirs if the account holder dies without appointing a nominee.
The support section of Zerodha Broking Ltd’s website states: “In case an individual is opening an account using the online process, it would be assumed that the individual has temporarily chosen not to nominate a nominee."
The nominee that an account holder adds is for the shares and other securities held in the demat account. Stockbrokers, therefore, have to follow the process laid down by the depositories—Central Depository Securities Ltd, or CDSL, and National Securities Depository Ltd, or NSDL.
If the account holder dies without appointing a nominee, legal heirs have to deal with tedious paperwork.
“The documents that legal heirs must submit for transfer of shares depend on the value of the holding. The paperwork is slightly different if the securities’ value is ₹5 lakh or below, or if it is above ₹5 lakh," said Venu Madhav, chief of operations, Zerodha.
Two documents are standard in both cases. The legal heirs must download and fill up the transmission request form available on the broker’s or depository’s website. The stockbroker will also need a copy of the death certificate, either notarized or attested by a gazetted officer.
If the securities’ value is ₹5 lakh or below, the legal heir will need to produce one or more of the following documents, depending on the case—a letter of indemnity, an affidavit, and a family settlement deed. If one of the legal heirs is applying for the transfer, others have to provide a no-objection certificate.
If the value of shares is above ₹5 lakh, the legal heirs must submit a succession certificate, a letter of administration, a copy of the Will of the account holder, depending on the case. The succession certificate that a court issues takes time.
It’s also best to appoint the legal heirs as nominees. In law, a nominee is a mere custodian of the assets. Legal heirs are the rightful owners. However, on the death of the account holder, the depositories transfer the shares to the nominee. If the legal heirs and the nominee are different, there are chances of a dispute.
If you are opening an online demat account, don’t delay sending the physical nomination form to the stockbroker.
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