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Crores Lie Unclaimed in Demat Accounts of Indians Who Pass Away! How to Safeguard Your Savings?

With thousands of crores of rupees lying unclaimed due to the lack of nominations, the Securities and Exchange Board of India (SEBI) has put out a consultation paper on easing the nominee process for your Demat accounts and other securities in case of any adverse events. Here's what that means for you and the steps you can take to protect your assets.

Crores Lie Unclaimed in Demat Accounts of Indians Who Pass Away! How to Safeguard Your Savings?

Let’s face it. None of us can foresee what’s waiting around the bend.

Ensuring your loved ones are safeguarded in case of any unforeseen circumstances is paramount. Yet, shockingly, many overlook a simple yet crucial step: adding nominations to all their investments, bank accounts, and insurance policies.

It’s not merely about streamlining matters for your beneficiaries; it’s about safeguarding your hard-earned money from being lost and ensuring it remains rightfully claimed.

What’s truly astonishing is the significant amount of unclaimed assets currently lying idle in demat accounts, mutual funds, and insurance policies due to the lack of nomination. Estimated to be anywhere between Rs 50,000 and 80,000 crore, this massive amount has no home to go to.

Seeing the problem, the Securities and Exchange Board of India (SEBI) has published a consultation paper on easing the nominations for your Demat accounts and other securities.

Why nomination is important

Including nominees in demat accounts is indispensable in ensuring the seamless transfer of securities, such as shares, bonds, and mutual funds, in the unfortunate event of the account holder’s demise. This vital step ensures that the transmission of these securities is smooth and without risks. Consequently, it shields the investments made by the account holder from the possibility of being lost or entangled in legal quagmires.

By adding nominees to your accounts, you’re not just simplifying matters for your beneficiaries — you’re also securing a brighter, more stable future for those you hold dear.

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What the consultation paper by SEBI says

The consultation paper by SEBI encapsulates close to all the potential doubts you may have concerning the nomination process for securities.

Before examining its contents, it is important to understand that a consultation paper is a document meant to spark discussion around policy proposals and ideas. Therefore, none of the points put forward by SEBI are binding, i.e. create a new law or policy. They are simply recommendations laid down for further conversation and consideration.

Looking at the contents of the consultation paper, they broadly lay down three issues: 

  • What the nomination process apply to
  • The role of nominees with respect to legal heirs and wills
  • The method of appointing nominees

It is also very clearly underscored that nomination is an ‘entirely optional process’. The recommendation SEBI makes is that in a single person-held demat account, a clear declaration be made that they do not wish to assign a nominee. This is simply a measure for the sake of procedural ease and clarity.

The one thing to keep in mind before reading the paper is the distinction between nominees and legal heirs, which can often be a point of confusion for a layperson. As highlighted by various financial experts and publications, nominees are not legal heirs to the securities. They are simply temporary custodians who are responsible for ensuring the securities are correctly transferred to the legal heirs, as per a will or law. They are akin to an executor of a will in this regard, but for a specific asset, in this case, securities.

In the paper, SEBI provides suggestions on processes for how nominees can be appointed and how they must act. Nominees can be appointed through digital methods for ease, however, safety is kept in mind in this process as well by ensuring the requirement of a digital signature or Aadhaar-based eSigns. One needs to provide identification of the proposed nominee(s) as well. In addition to this, physical nomination through thumb impressions and verification also continues to be proposed.

It provides various scenarios, such as sole accounts, joint accounts, simultaneous deaths of account holders among others, and how a nominee will be given charge of the account for the next steps in each case. It also lays down which legal heirs are entitled to the securities in cases of joint accounts, etc.

You can read a more detailed summary of the paper, and provide your feedback on it by 8 March, 2024, on the Civis Platform here.

Civis is a civic-tech organisation that aggregates and simplifies draft laws and policies that are open for public feedback, with the goal of making the process as simple for you as possible.

The consultation paper has been hosted with a summary that you can read in an accessible format, in both English and Hindi, and give your feedback.

This article was written by the team at Civis.vote, a non-profit platform that works to build dialogue between governments and citizens, using technology to bridge the gap between the two.

Edited by Padmashree Pande.

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