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

After a person's death, the surviving family members need to figure out how to go ahead with the transmission of the deceased person’s assets. That is, how to transfer the ownership of the assets to the next of kin.

The process of transmission can vary across asset classes. It can also be a function of the form in which the asset is held, in case of securities – such as, in physical or demat mode. In this article, we look at how one can proceed with transmission of securities (shares, mutual funds, bonds etc.) held in a demat account after the account holder's death. In such a situation, the nominee, or the legal heir(s) if no nominee has been registered for the demat account, will have to approach the depository participant (that is, the demat account provider such as a broker or a bank) with the transmission request form and the relevant documents.

The nominee is not the owner, and is only a custodian/trustee of assets until these are passed on to the ultimate legal heirs based on the deceased person’s will, if any, or the succession laws. The nominee can, however, also be a legal heir. For example, you may choose one of your two sons as a nominee but both of them will be your legal heirs unless specified differently in your will.

There can be multiple scenarios, and the documents needed for transmission will depend on the specifics of each case.

Scenario 1

The simplest case is where the demat account is jointly held by say three people - A, B and C, and A passes away. Then, the surviving demat account holders, B and C will approach their depository participant (DP) with a transmission request form, A’s death certificate (either original or a copy of it attested by a notary or a first-class magistrate), their KYC documents along with bank-attested signature verification, and cancelled cheques with their names on them or recent (not more than 3 months’ old) bank statements. For KYC, they can submit their PAN card for identity proof and Aadhaar card for address proof. Other options include Voter ID card and Ration card.

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B and C have to also submit a duly stamped and attested client master report (CMR) of a joint demat account in their names. This can be an existing or a newly opened demat account in the same order of ownership as in 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 the transmission of securities to the new demat account, the old demat account ceases to exist, and hence stands closed.

Scenario 2

The other relatively simple case is where a demat account has a single holder who has passed away, or the account is jointly held and all the account holders have passed away, and two nominees, say D and E have been specified for this account. You can have one nominee and go up to a maximum of three. In this case, D and E will have to submit the same documents as submitted by the surviving account holders under Scenario 1 and a similar process follows. They have to submit a transmission request form along with the death certificate of the deceased account holders, their KYC documents along with their bank-attested signature verification, and cancelled cheques with their names on them or recent (not more than 3 months’ old) bank statements. They also have to provide a duly stamped and attested CMR of a joint demat account in their names (in the same order of sequence as nominees).

So, in a situation where a nominee has been specified, the process of transmission is fairly straightforward. But, in the absence of a nominee, the process gets more complicated, and additional documents have to be submitted depending on the value of the securities in the demat account on the date of claim. This can result in two scenarios.

Scenario 3

Demat account has no nominee, and the value of the securities in the demat account is up to Rs.15 lakh on the date of claim. In the absence of a nominee, the legal heirs will have to proceed with the process. They can either together file a claim for transmission or alternatively, appoint one or more individuals among them as claimants to represent the case to the DP on their behalf. The following documents will have to be submitted – death certificate of the deceased demat account holder and KYC documents along with bank attested signature verification of the claimant(s) and legal heirs. The claimant (s) will also have to provide cancelled cheques with their names on them or their recent bank statements.

The legal heirs will have to provide an NOC (no objection certificate) to prove that they are in agreement on the chosen claimant to represent on their behalf. Additionally, they also have to submit individual affidavits and indemnity bonds.

Scenario 4

Demat account has no nominee, and the value of the securities in the demat account exceeds Rs.15 lakh on the date of claim. Under this scenario, the same documents as required under scenario 3 will have to be furnished to the DP. In addition, the claimant (s) has to provide probate of will, or a succession certificate or a letter of administration (LOA) to help establish their identity as a claimant (s).

Time and cost

“While a will is the most reliable and legally acceptable document to aid in the asset distribution post the demise of the asset owner, in the absence of a will, legal heirs need to undergo a well-established and documented process which could be time-consuming and cost-gulping, “says Rajat Dutta, founder & initiator, Inheritance Needs Services. Sanober Marolia, head – estate planning, Anand Rathi Wealth highlights that the process of transmission can take up to approximately six working days once all the documents have been submitted. This is subject to all the documents being in order. “When there is no nomination in a demat account, probate of will / succession certificate / LOA will have to be obtained and this can take from six months to up to a year". With a probate, the court endorses a will to be the deceased’s person’s last and final will and thereby certifies that the distribution of assets be done in accordance with it.

Dutta suggests that in absence of a will, if there is harmonious relationship between the family members (beneficiaries), then securing an LOA is advisable. The LOA lists out all the assets of the deceased person, and mentions the administrator (appointed by the beneficiaries) who will administer the process of distribution of all assets with the consent of the beneficiaries. In cases where there is a dispute within the family, then a succession certificate has to be obtained from the court. The succession certificate simply lists out all the assets and the names of all the successors of the deceased person. The distribution is undertaken in accordance with the relevant succession laws.

According to Marolia, there are no charges for the transmission process. But there is cost involved in getting probate of a will / succession certificate / LOA, which usually varies from city to city and lawyer to lawyer. For example, In Mumbai, the court fees is capped at Rs. 75,000, and the lawyer’s fees can range from Rs. 1.25-1.5 lakh.

Given that having a nominee makes the process of transmission significantly simpler and smoother, registering a nominee is an absolute must. Note that since the nominee has to be specified at the level of the demat account, he / she becomes the relevant custodian of all the securities in the demat account on the demise of the account holder.

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