How to transfer shares after a family member’s death: 4 scenarios

After the death of a person, the survivors must clarify how to proceed with the transfer of the deceased person’s property. That is, how ownership of the assets can be transferred to the next of kin.

The transfer process may vary by asset class. It may also be a function of the form in which the asset is held, in the case of securities – e.g. B. in physical form or in demat mode. In this article, we look at how to proceed with the transfer of securities (stocks, mutual funds, bonds, etc.) held in a Demat account after the account holder’s death. In such a situation, the nominee or, if no nominee has been registered for the Demat Account, the nominee(s) must contact the custodial participant (i.e. the provider of the Demat Account such as a broker or bank) with the transfer request form and related documentation .

The nominee is not the owner but only a custodian/trustee of assets until they are passed on to the ultimate legal heirs based on the deceased person’s will, if any, or inheritance law. However, the nominee can also be a legal heir. For example, you can choose either of your two sons as a candidate, but both will become your legal heirs unless otherwise specified in your will.

There may be several scenarios and the documents required for submission will depend on the specifics of each case.

scenario 1

The simplest case is when the demat account is held jointly by, for example, three people – A, B and C, and A dies. Then the surviving Demat account holders, B and C, contact their depositary participant (DP) with a transfer request form, A’s death certificate (either the original or a copy thereof certified by a notary public or a first class bailiff), their KYC documents along with bank certified signature verification and canceled checks with their names on them or recent (not older than 3 months) bank statements. For KYC, they can submit their PAN card for proof of identity and Aadhaar card for proof of address. Other options include the voter card and ration card.

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B and C must also submit a duly stamped and attested Client Master Report (CMR) of a joint Demat account on their behalf. This can be an existing Demat Account or a newly opened Demat Account with the same ownership structure as the original Demat Account. The CMR is a digitally or physically signed certificate with the details of your Demat account issued by the broker. After securities are transferred to the new Demat account, the old Demat account will expire and remain closed.

scenario 2

The other relatively simple case is when a demat account has a single holder who is deceased, or the account is held jointly and all account holders are deceased and two nominees, say D and E, have been designated for that account. You can have one candidate and advance to a maximum of three. In this case, D and E must submit the same documents submitted by the surviving account holders in Scenario 1, and a similar process follows. They must submit a Transfer Request Form along with the death certificate of the deceased account holders, their KYC documents along with their certified signature confirmation and canceled checks with their names on them or recent (no older than 3 months). bank statements. They must also provide a properly stamped and notarized CMR of a joint Demat account in their name (in the same order as the nominees).

So, in a situation where a nominee has been specified, the submission process is fairly straightforward. However, without a nominee, the process becomes more complicated and additional documents must be submitted depending on the value of the securities in the Demat account at the time of the claim. This can lead to two scenarios.

scenario 3

Demat account has no nominee and the value of securities in Demat account is up to Rs.15 lakh on the day of claim. In the absence of a candidate, the legal heirs must proceed with the proceedings. They can either submit a request for transfer together or, alternatively, appoint one or more of them as applicants to represent the case on their behalf before the data protection authority. The following documents must be submitted – Death Certificate of the deceased Demat Account holder and KYC documents along with notarized signature of the applicant(s) and legal heirs. Applicant(s) must also provide canceled checks with their names or their most recent bank statements.

The legal heirs must provide a NOC (not a certificate of objection) to show that they consent to the selected applicant acting on their behalf. In addition, they must also file individual affidavits and liability waivers.

scenario 4

Demat account has no nominee and the value of securities held in Demat account exceeds Rs.15 lakh on the date of claim. In this scenario, the same documents as in scenario 3 must be submitted to the DP. In addition, the applicant(s) must provide proof of a will, a certificate of probate, or a letter of administration (LOA) to prove their identity as the applicant(s).

time and cost

“While a will is the most reliable and legally acceptable document to assist in the distribution of wealth after the death of the property owner, in the absence of a will, legal heirs must go through a well-established and documented process that could be time-consuming. complex and costly,” says Rajat Dutta, founder & initiator of Inheritance Needs Services. Sanober Marolia, Head – Estate Planning, Anand Rathi Wealth, emphasizes that the submission process can take up to six working days once all documents have been submitted. The prerequisite is that all documents are in order. “If there is no nomination in a Demat account, a probate/probate certificate/LOA must be obtained and this can take six months to a year.” With a probate, the court confirms and certifies a will of the testator’s person so that the distribution of wealth follows.

Dutta suggests that in the absence of a will, when there is a harmonious relationship between family members (beneficiaries), securing an LOA is advisable. The LOA lists all of the deceased’s assets and mentions the steward (appointed by the beneficiaries) who will manage the process of distributing all of the assets with the consent of the beneficiaries. In the event of disputes within the family, a certificate of inheritance must be obtained from the court. The certificate of inheritance merely lists the total assets and the names of all heirs of the deceased person. The distribution is based on the relevant inheritance rights.

According to Marolia, there are no fees for the transmission process. However, obtaining a Will/Probate Certificate/LOA comes with a cost that usually varies from city to city and attorney to attorney. For example, court fees in Mumbai are capped at Rs. 75,000, and attorney fees can range from Rs. 1.25-1.5 lakhs.

Since a nominee makes the transfer process much easier and smoother, registering a nominee is an absolute must. Note that since the nominee must be specified at the demat account level, upon the death of the account holder, the nominee becomes the relevant custodian of all securities in the demat account.

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