What Happens If You Don’t Add a Nominee to Your Demat Account?
A Demat account is essential for holding and trading securities in electronic form. While opening one, you’re usually given the option to add a nominee—a person who will inherit your holdings in case of your demise. Yet, many investors skip this step, assuming it’s not urgent. Unfortunately, failing to add a nominee can cause legal and emotional distress for your loved ones later.
In this article, we’ll break down why adding a nominee is important, the consequences of not doing it, and how you can fix it.
What is a Nominee in a Demat Account?
A nominee
is a person (usually a family member) designated to receive the securities in
your Demat account if you pass away. The nominee does not have ownership rights
while you’re alive, but gains the right to claim the securities after your
death, following the completion of necessary formalities.
Nominee details are recorded with your Depository Participant (DP) and stored with the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL).
Why People Skip Adding a Nominee
Many
investors neglect adding a nominee for reasons like:
- Overconfidence – Thinking nothing will happen soon.
- Lack of awareness – Not knowing its importance.
- Assumption that legal heirs can claim – Believing that heirs can automatically take
over assets without issues.
- Delay in paperwork – Procrastination in filling out the
nomination form.
Unfortunately, these assumptions can backfire.
Immediate Consequences of Not Having a Nominee
If you die
without a nominee in your Demat account, the transfer of your holdings becomes legally
complex.
Key
challenges include:
Multiple claimants – Disputes between family members can stall asset transfer.
Requirement of a succession certificate – This can take months to obtain.
Possible freezing of account – Until rightful ownership is established.
Legal
Process for Transfer Without a Nominee
When
there’s no nominee, your family cannot simply request the shares to be
transferred. They must follow a legal procedure:
Submit supporting documents – Death certificate, proof of relationship, and identification documents.
Verification by DP – The depository participant will verify all details before initiating the transfer.
Possible court hearings – Especially if there’s a dispute.
This can take several months or even over a year, leaving investments stuck.
Financial Risks of Not Adding a Nominee
- Loss of timely access to funds – Heirs might need money urgently but
can’t liquidate securities.
- Missed corporate actions – Such as dividends, bonuses, or rights
issues.
- Market volatility impact – Shares may lose value while legal proceedings are pending.
Real-Life Example
Imagine you have stocks worth ₹25 lakh in your Demat account but no nominee. If you pass away unexpectedly, your spouse will have to obtain a succession certificate, which could take 6–12 months and incur legal fees. Meanwhile, the market value of your holdings could drop significantly.
How Adding a Nominee Simplifies Things
With a
nominee:
- No court process – The DP transfers securities directly
after basic verification.
- Quick settlement – Usually completed within weeks.
- Reduced disputes – The nominee’s claim takes precedence over other heirs.
Who Can You Appoint as a Nominee?
You can
appoint:
- A family member (spouse, child, parent)
- Any other individual you trust
- A minor (with a guardian)
How to Add a Nominee to Your Demat Account
Download Nomination Form (Form SH-13) from your DP’s website.Fill in nominee details – Name, address, relationship, date of birth.
Attach proof of identity of the nominee.
Submit to your DP physically or through e-sign if an online facility is available.
Get confirmation – The DP will update records and issue a confirmation.
Can You Change or Cancel a Nominee?
Yes. You can modify or remove a nominee anytime by submitting Form SH-14 to your DP. This is useful in case of changes in family circumstances, such as marriage, divorce, or the nominee’s demise.
Regulatory Requirements (SEBI Guidelines)
As per SEBI’s latest rules, adding a nominee or opting out by submitting a declaration is now mandatory for Demat accounts. If you don’t do either, your account may face restrictions on transactions.
Final Take – Don’t Delay Nomination
Not adding
a nominee to your Demat account can cause unnecessary legal hassles, emotional
stress, and financial delays for your loved ones.
A simple 5-minute nomination process ensures:
- Seamless transfer of assets
- Quick access to funds
- Peace of mind for you and your family
Lares Algotech advises
all investors to review their Demat account details today and ensure a nominee
is in place. It’s a small step that can make a big difference.
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