If you have financial assets, you know the importance of a demat account. It is a digital repository of all your securities, such as shares, government bonds, mutual funds, and exchange-traded funds (EFTs). One of the main benefits of having a Demat account is it is safe, secure, and easily transferable. But who is entitled to these assets in case of unfortunate events? Having a nominee for a Demat account is one of the most important steps in safeguarding the assets. But who is a nominee? This article will walk you through the entire concept of nomination in Demat accounts.
Understanding a nominee: Why should one add a nominee to their Demat Account?
Let us explain this with an example:
Mr. Sen is a single father living in Bangalore, while his son, Mohit, lives in the US with his family. Mr.Sen lived a comfortable life as he invested in diverse assets, and after his demise, he left bountiful property and assets to Mohit. Unfortunately, when Mohit came to India, he had a hard time transferring and claiming the assets. But why? Although Mr.Sen was a prudent man, he did not add a nominee for his demat account because he thought by default Mohit would inherit all the property. Unfortunately, Mr.Sen is not the only one.
A recent consultation paper by SEBI indicates that 70% of single demat account holders have ‘opted out’ from appointing a nominee. However, experts opine that this can lead to several complications and lengthy processes to claim the assets when the account holder passes away. Hence, it is imperative to have at least one nominee. Now, Mohit has to present a succession certificate, probated will, or a letter of administration to get his father’s assets. This can be arduous and time-consuming. So, how could you save your loved ones from ending up like Mohit?
Adding a nominee to your demat account is the easiest and safest way of ensuring your loved ones get your assets after you are gone. A nominee is an individual(s) you appoint who will inherit and manage all the assets in the demat account after the account holder’s death. It is an important step for ensuring smooth asset transfer. Hence, a nominee is a key actor while opening and maintaining a demat account.
How many nominees can you add to your Demat account?
While it is essential to have at least one nominee for your demat account to avoid ambiguity in the event of asset distribution, you can have more than one nominee. You can have up to three nominees for a demat account. They can be your family members, friends, or trusted acquaintances.
Who is an eligible nominee?
You need to ensure that the nominee is a real person. You cannot appoint corporations and societies as your nominee. So, who can be a nominee? Your parents, spouse, siblings, and even friends can be a nominee. Minors can also be appointed as nominees. However, in that case, you have to provide their guardians’ details.
A step-by-step guide to adding a nominee to your demat account:
Adding a nominee to your demat account is a simple, online process. Here is a comprehensive 9-step process you can follow if your Demat account is held with NSDL.
- Visit rekyc.daycoindia.com portal.
- Login with your UCC & Date of Birth
- Authenticate your information with an OTP.
- Choose ‘Nominees’ from the Homepage.
- You will be given two options:
a. Option 1: I wish to Nominate
b. Option 2: opt-out - Choose Option 1: I wish to Nominate
- Fill up the Nominee deatils
- Next, you will be redirected to the Protean eGov page, where you will complete the Aadhar eSign.
- Finally, you will receive an OTP and submit it to complete the nomination process.
For users registered with CDSL, you can login to your EASI account and click on the Nomination tab. (However, if you opted out of nomination, you might not be able to use this feature. In that case, contact your Depository Participant)
However, if this process seems complex or you do not have enough time to complete all the steps, you can contact your Depository Participant (DP) to set up a nominee for your Demat account.
Updating the nomination for your demat account:
Updating, changing, or removing nominees on a demat account is simple and flexible. You can do this through the official NSDL website. Simple login with your credentials and select the ‘Add/Update Nominee details’. Then all you have to do is submit the new details, fill in the required information, and submit the form. The changes will come into effect within 5 working days.
There are usually no conditions for making the changes. However, per new SEBI guidelines, your demat account must have a nominee by June 30, 2024, for the account to be active. While you can update the nomination details online, your depository participant can also help you make the changes. You can download the forms from the NSDL website, fill them and hand it over to the depository participant, who shall take care of the rest.
Making the right financial choices
Handling money can be complex, especially when it comes to decoding fine blueprints. Sound financial literacy can go a long way in determining how you handle, manage, and transfer your assets seamlessly. Adding a nominee to your demat account can reduce unnecessary legal complications. But where do you find all the important information? In moments like these, expert financial advice on the Dayco platform can come to your rescue.
We hope you find this article handy next time you open a demat account.
~ Nischay Avichal
