Introduction
Has the question ever crossed your mind as to what happens to the investor’s securities if they pass away? Well, many investors enter into the world of investing without proper planning for the future. They are focused solely on short-term goals overlooking critical aspects such as planning for what happens to their investments after their death. This article delves into the process of transmission of securities when the account holder is no longer alive.
Before we explore the process, it’s important to understand what a Demat account is.
An investor first needs to open a Demat and trading account with a broker firm to invest in securities like stocks, bonds, or mutual bonds.
A trading account serves as a platform for buying and selling securities, enabling you to purchase or sell shares. It also keeps a record of all transactions related to the buying and selling of these shares. On the other hand, a Demat account (short for Dematerialized account) is an electronic account that stores securities like stocks, bonds, mutual funds, exchange-traded funds (ETFs), and government securities in a digital format. It eliminates the need for physical certificates, which reduces paperwork, lowers the risk of loss, damage, or forgery, and simplifies the process of buying, selling, or transferring securities.
However, a Demat account can be held alone or it can be held jointly; it entirely depends on the account holder. One important thing to know is what happens to the investments in a Demat account in the event of the death of the account holder. In such cases, the rule of transmission applies which is the transfer of securities. The transmission process requires navigating legal procedures, documentation, and coordination with designated Depository Participants.
The transmission of securities in a Demat account after the account holder’s death depends on whether the account was held individually or jointly.
When Nominee/Nominees exists
In the case where the demat account is held by a single person and has a nominee added to the Demat account, then the securities are transferred to the nominee straightforward on the account holder’s death.
Simply, the nominee has to submit a transmission form, which can be obtained from the Depository Participant’s office or downloaded from their website, and a closing form. Also, the nominee has to provide a notarized copy of the death certificate, attested by a Gazetted Officer or a Notary Public.
Along with these documents, the nominee must keep their Client Master Report which can be downloaded from the Depository Participant’s trading platform website.
Once the submission process of the documents is completed, they are transmitted to the Demat account nominee. The process generally takes around 15 working days once all necessary documents are submitted and verified by the Depository Participant.
When the Account is held jointly
When the Demat account is held jointly, and if one of the account holders passes away, the securities are transmitted to the surviving holders wherein a transmission form, closing form, and a notarized copy of the death certificate of the deceased holder.
If both the joint holders pass away, then the securities are transferred to the nominee.
However, for the transmission of securities, the surviving holders need to have or open a separate Demat account with names in the same order as in the joint account to be closed.
Conclusion
Summing up, it is imperative to understand how securities are transmitted upon the death of a Demat account holder for a seamless transfer of assets. Investors should be aware of the legal framework and follow the necessary steps so that heirs can avoid potential delays and complications in the process. With the right knowledge and preparation, managing and transferring investments after the account holder’s passing can be much smoother.
FAQs
- What happens to a Demat account if the account holder passes away?
Ans. In the event of the death of a Demat account holder, the securities in the account can be transferred to the nominee/nominees, or surviving joint holders, depending on the account setup and registration.
2. What is the process of transmission of securities in a Demat account?
Ans. The transmission process involves submitting the necessary documents to the Depository Participant, such as the death certificate, transmission form, and other legal documents, after which the Depository Participant verifies them and transfers the securities to the rightful beneficiary.
- Is it necessary to appoint a nominee for a Demat account?
Ans: Yes, it is mandatory to appoint a nominee. It simplifies the transfer of securities upon the account holder’s death, reducing paperwork and avoiding delays or legal disputes among heirs.
- What documents are required for the transmission of securities if a nominee is registered?
Ans. The nominee must submit the transmission form, closing form, a copy of the account holder’s death certificate, and proof of their identity such as PAN and Aadhar, plus Client Master Report. Additional documents may be required as per the Depository Participants’s guidelines.
- How long does it take to complete the transmission process?
Ans. Typically, the transmission process takes around 10/15 days after all the required documents have been submitted and verified by the Depository Participant.
- What is the difference between transmission and transfer of securities?
Ans. Transmission of securities is an involuntary act that refers to the transfer of ownership due to the death of the account holder. Whereas the transfer of securities is a voluntary act between two or more living individuals.
- Is it possible to change or update the nominee/nominees details?
Ans. Yes, the account holder can update or change the nominee/nominees at any time by submitting a new nomination form to the Depository Participant.
- What should I do if the Demat account was jointly held and one of the account holders passes away?
Ans. If the account is held jointly, the surviving joint holder(s) must submit a death certificate, closing form, and transmission form to the Depository Participant to update the account details and transfer the securities to the surviving holders.
