“People don’t understand the consequences of no nominations,” said an official from a depository, which holds shares in dematerialised format. “Most of them don’t write a Will. And if no nominee is listed, then the surviving family of the deceased investor has to prove that they are the legal beneficiaries. Otherwise, the money will remain as an unclaimed asset.”
According to market regulator Sebi, a primary factor contributing to the rise in unclaimed assets is incomplete nominations or unavailability of nominations. “This feeds into and impacts the consequent transmission process of the deceased/incapacitated holder of assets, making transmission an ordeal for (his/her) family.”
About 70% or 100 million individually owned demat accounts have deliberately opted out of nomination, while about 3% or 3.8 million demat accounts have neither nominated nor opted out.
Against this background, Sebi is revamping the nominations framework to reduce the quantum of unclaimed assets in the securities system and to smoothen the transmission process for the surviving family of the deceased investors.
It plans to allow demat account holders to make, change or cancel nominations “any time without any restrictions”. Further, it plans to increase the number of nominees from three to “high two digits or very high three digits (i.e 99 or 999), which are large and sufficiently high to address ordinary requirements of individual investors”. It also proposes to permit demat account holders to specify percentage share of their corpus to nominees. Interestingly, Sebi data showed that only 0.5% of demat account holders have listed more than one nominee. “While a nominee can claim financial assets after the death of the investor, it’s important to note that s/he is merely a custodian of the assets and doesn’t have absolute ownership over them,” said Motilal Oswal Wealth managing partner (estate planning) Neha Pathak. “The eventual ownership lies with the legal heirs. A Will can provide a comprehensive guidance on the assets as well as on the distribution of them, helping avoid potential disputes among heirs. Therefore, having both a nominee and a Will can be a prudent approach for comprehensive estate planning,” Pathak added.
Ladderup Wealth Management MD Raghvendra Nath said that if two nominees are listed and in case one nominee has predeceased, the other nominee shall get only half of the demat holdings. “For the other half, the family shall have to use the probated Will or obtain a letter of administration from the court, which could be a time-taking process,” Nath said.
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