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Business News/ Money / Personal Finance/  Why adding a nominee to your Demat account is just not enough

Why adding a nominee to your Demat account is just not enough

While many investors rely on the nomination process in their demat accounts to ensure a seamless transfer of wealth to their loved ones, it’s crucial to understand the limitations of this process.


As India’s investor community grows, more individuals are turning to stock market investments to grow their wealth. While many investors rely on the nomination process in their demat accounts to ensure a seamless transfer of wealth to their loved ones, it’s crucial to understand the limitations of this process. An over-reliance on this nomination process is a risky gamble that may leave your financial legacy in jeopardy.

To begin with, a nominee is a person appointed by the demat account holder to receive the securities in the event of the latter’s death. This arrangement may seem like a foolproof way to ensure that your assets reach the intended recipient; however, this is not the case. Nominees are not the legal heirs to your assets; they merely act as a custodian to facilitate the transfer of wealth.

Why do you need a will?

A will is a legal document that allows you to decide how your assets are distributed among your beneficiaries after your death. It ensures that your wealth is transferred to the intended recipients, thus avoiding any disputes among family members. In the absence of a will, the assets are distributed according to the applicable succession laws, which may not align with your wishes.

For instance, let’s consider that Kumar has nominated his eldest son as the nominee in his demat account. In the event of Kumar’s demise, the securities would be transferred to his son, who would act as a custodian. However, if Kumar’s will mentions that the stocks are to be distributed among his three children equally, the nominee is legally bound to distribute the assets accordingly. Thus, a will supersedes the nomination in the demat account, emphasizing the importance of having a well-drafted will.

The repercussions of not having a will

The absence of a will can leave the distribution of assets to be determined by intestacy laws, which often do not align with the deceased’s wishes. This can result in protracted legal battles, strained family relationships, and potentially substantial financial losses—eroding the value of the estate.

As we approach the next decade, India’s unclaimed assets, currently at 1.20 trillion, are poised to grow exponentially due to the rapid adoption of fin-tech, which has the potential to render paper trails obsolete. With the typical process of accessing inheritance in India takes about a year and costs a minimum of 1.5 lakh, we must acknowledge the need to find effective solutions that connect families with their rightful inheritance, harmonizing technology and tradition.

How can one go about drafting a will?

Drafting a will begins with taking an inventory of your assets, including property, investments, and all other valuable possessions. Next, decide on your beneficiaries and specify the distribution of assets among them. Appoint a trusted executor to carry out your wishes and manage the estate. Consider naming a guardian for minor children, if applicable. Consult with a legal professional or use a reputable online will platform to ensure your testimony adheres to local laws and regulations.

Traditionally, drafting a will involved consulting a lawyer or professional will writer, often proving to be time-consuming, expensive, and inaccessible to many. Typically, it can cost up to 2 lakh to write a legally valid will through a lawyer in India and an average of 1 month to get a will drafted. However, with technological advancements, online will platforms have emerged, simplifying the process and offering a better alternative. These online platforms guide users by creating legally valid wills with customizable templates tailored to individual needs and can deliver a draft in a couple of hours and cost as low as 500 for a draft of the will.

Safeguard your financial legacy

To secure your financial legacy and ensure that your assets are distributed according to your wishes, it is strongly recommended that you do not rely solely on the nomination process in your demat account. It is essential to have a well-drafted will in place. The advent of online will platforms has made this process more accessible than ever before. By taking advantage of these resources and understanding the limitations of demat nominations, you can protect your wealth and provide peace of mind to your loved ones.

Vishnu Chundi is founder and CEO of AasaanWill

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Published: 09 May 2023, 11:45 PM IST
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