A demat account contains securities in dematerialized form. Like any other class of assets, the question of transmission of the securities contained in a demat account upon the death of the holder needs to be addressed. Usually, this involves the transfer of shares from one demat account to another. There are three common scenarios upon the death of a demat account holder.
- A nominee was appointed prior to demise by the demat account holder.
- The demat account was jointly operated.
- The demat account had a single owner and no nominee was appointed.
Except in the second case, the securities would need to be transmitted to a different account. Therefore it is important to understand how to transfer shares from one demat account to another in each case.
1. Nominee Exists
When opening a demat account, there is usually an option to appoint a nominee. The nominee is the entity to whom the assets contained in the demat account are transmitted in the event of the death of the demat account holder. However, this transmission is not automatic and one needs to follow the due process to transfer shares from demat to another. To do this, the nominee has to send the following documents to the office of the depository participant (DP):
- Transmission Request Form – This is a form that contains the details of the client, the nominee, and the assets contained in the demat account that need to be transferred. The form can be downloaded from the website of your depository participant (DP).
- Death Certificate – A copy of the death certificate of the now-deceased account holder that has been notarized by a notary or attested by a Gazetted Officer.
- Client Master Report – A client master report or CMR is an important KYC document that contains all the details of the client and their demat account such as the securities held, the bank account linked with the demat account, etc. In this case, the client master report of the nominee is required. The CMR can be downloaded from the website of the trading platform of your DP.
2. Joint Demat Account
In case the demat account was a joint account, the second account holder succeeds to the ownership of the assets contained in the account. In this case, the following documents are required:
- Transmission Request Form– This is the same form as required in the previous case. However, in the case of joint accounts, most DPs usually have a separate annexure that differs from the annexure required in the case of a nominee. You will need to fill up the correct annexure as provided by your DP.
- Death Certificate – A copy of the death certificate duly signed by a notary or Gazetted Officer.
- Client Master Report – The CMR of the joint account holders is required.
3. Single Owner and No Nominee Exists
How to transfer shares from one demat to another online in case of death the account of the deceased was singly operated and the deceased did not appoint any nominee? This is a slightly more complex case than the previous ones. To transfer shares from one demat to another in this the following documents will need to be submitted to the DP.
- Transmission Request Form – Just as in the previous two cases, the transmission request form, duly filled is needed.
- Death Certificate – A copy of the death certificate duly attested by a notary or Gazetted Officer is needed to be submitted along with the Transmission Request Form.
- In addition to the above two, any one of the following documents is needed:
- Letter of Indemnity – A letter of indemnity is a legal declaration that the person mentioned in the letter is the legal heir of the deceased. In this case, the letter needs to be executed on non-judicial paper and notarized by a notary.
- Affidavit – An affidavit on non-judicial stamp paper stating that the applicant is the legal heir of the deceased, and thus the rightful claimant to the assets contained in the demat account can also be used. Such an affidavit needs to be duly notarized.
- No-Objection Certificate – This is needed in case there are multiple legal heirs and one of them is the applicant. Such a NOC states that the other legal heirs have no objection to the securities contained in the demat account of the deceased being transmitted to the applicant.
- Family Settlement Deed – A family settlement deed is useful whenever assets of the deceased need to be partitioned among the surviving heirs. In this case, where one needs to transfer shares from one demat to another, the family settlement deed can detail the appropriate partitioning of shares among the various surviving legal heirs.
It is important to know how to transfer shares from one demat account to another in case of the demise of the account holder. As seen from the previous sections, the process is much simpler in the case of joint accounts or in cases where the account holder has appointed a nominee. Appointing a nominee gives a clear statement on who is to succeed to the assets contained in the demat account in the event of the death of the account holder. Therefore, it is a good practice to appoint a nominee when opening a demat account to avoid hassles later on.