Paperwork That Protects Your Family

The chapter nobody reads until it is too late

Every year, substantial sums lie unclaimed in Indian financial accounts. Not because of fraud. Because the person who invested did not complete a two-minute formality, and the family could not prove entitlement to something they did not know existed.

This is the most preventable financial loss described anywhere in this book. It costs nothing to fix and it takes an afternoon.

Nomination

A nomination tells the institution who should receive the assets in your account if you die. It applies to demat accounts, mutual fund folios, bank accounts, insurance policies, PPF and most other financial accounts.

Why it matters so much

Without a nomination, the institution cannot simply hand assets to a family member. Your heirs must establish legal entitlement — which can require a succession certificate, a probated will, or a legal heirship certificate, depending on the circumstances. That process takes months, costs money, and arrives at the worst possible time for a grieving family.

With a valid nomination, the process is comparatively simple.

How to do it

• Register a nominee when you open the account. Do not defer it
• Provide accurate details — full name, date of birth, relationship, address
• Depending on the current framework, multiple nominees may bepermitted, with the percentage share to each specified. Check the current rules with your DP, AMC or bank
• For a minor nominee, appoint a guardian
• Review after every major life event — marriage, divorce, a birth, a death. An outdated nomination naming a former spouse or a deceased parent creates precisely the problem nomination was meant to prevent
• Keep a record of what you nominated where

What a nomination is and is not

A nominee receives the assets and holds them in accordance with applicable succession law. Nomination determines who receives; succession law and any valid will determine who is ultimately entitled.

This distinction matters. Nomination is not a substitute for a will. It is the mechanism that lets assets move quickly; the will and the law determine the final beneficial entitlement. For any meaningful estate, make a will as well.

Transfer and transmission

These sound similar and are entirely different.

Transfer is a voluntary change of ownership while the holder is alive — a sale, a gift, or a move between accounts.

Transmission is the passing of securities by operation of law — on the death of a holder, or in the case of insolvency or a similar event. It is not initiated by the holder; it happens to the holding.

How transmission works

With a nomination: the nominee approaches the DP or RTA with a transmission request, the death certificate, and prescribed identification. The process is comparatively straightforward.

Without a nomination: the legal heirs must establish entitlement, typically through a succession certificate, probated will, letter of administration, or in some cases — for smaller values — an indemnity, affidavit and no-objection documentation. Requirements vary with the value and the depository’s or RTA’s prescribed procedure.

For jointly held accounts: securities generally pass to the surviving holder or holders on production of the death certificate, and the account is then updated. This is often the simplest arrangement of all, which is why joint holding with a spouse, combined with nomination, is worth considering.

Transposition

Transposition is changing the order of names in a jointly held security, without changing who the holders are.

If a physical certificate reads “A and B” but the demat account is in the name of “B and A,” they will not match, and the dematerialisation or transfer will be rejected. Transposition corrects the order.

Since the names are identical and only the sequence changes, this is not treated as a transfer of ownership and generally does not attract stamp duty. A transposition request form, signed by all holders, is submitted to the DP or RTA along with the certificate.

Off-market transfer

An off-market transfer moves securities from one demat account to another without going through the stock exchange. It is used for gifting, transfers between family members, transfers between your own accounts, and pledging.

How it is done

Through a Delivery Instruction Slip (DIS), physical or electronic, submitted to your DP. A DDPI does not cover this: it authorises settlement, margin pledging, exchange-platform mutual fund transactions and open offers, not gifts or transfers between accounts. The instruction must specify:

• The ISIN of the security
• Quantity
• The recipient’s DP ID and Client ID
• The reason for transfer
• Execution date

Rules that protect you

• Never keep a signed blank DIS with anyone — not your broker, not your DP, not a relative. It is a signed blank cheque for your securities
• Keep the DIS booklet in your own custody
• Verify every detail before signing. An incorrect ISIN or Client ID sends securities to the wrong place, and recovery is difficult
• Names must match exactly for joint accounts. Mismatched patterns are rejected
• Understand the tax position. An off-market transfer that is a sale is a taxable transaction. STT does not apply to off-market transfers, but capital gains rules do
• Off-market transfers do not have the clearing corporation guarantee that exchange trades have. Care matters more here, not less

Gifting shares

Shares can be gifted to family members through an off-market transfer.

The process: the donor completes a DIS specifying “gift” as the reason. Many DPs also require a gift deed or declaration. The securities move to the recipient’s demat account.

Tax: gifts between specified relatives are generally exempt from tax in the recipient’s hands under the applicable provisions. Gifts to non-relatives above prescribed thresholds may be taxable for the recipient. When the recipient eventually sells, the original purchase cost and holding period of the donor are generally considered for computing capital gains. Verify the current provisions.

Practical points: the recipient must have a demat account and be KYC-compliant. Keep the gift documentation — it will matter when the recipient sells.

Unclaimed shares and dividends: the IEPF

Dividends that remain unclaimed for seven consecutive years, and the underlying shares, are transferred by companies to the Investor Education and Protection Fund (IEPF), administered by the Government of India.

This happens for entirely mundane reasons — a change of address, an old bank account closed, a shareholder who died without the family knowing, a physical certificate in a forgotten file.

Recovering them

The money is not lost. It can be reclaimed.

1. Check whether you have anything. The IEPF Authority website (iepf.gov.in) provides a search facility using name and other identifiers. Companies also publish lists of unclaimed amounts. It costs nothing to look
2. File Form IEPF-5 online with the IEPF Authority
3. Submit the physical documents — the acknowledgement, an indemnity bond, an advance receipt, and supporting proofs — to the company’s Nodal Officer
4. The company verifies and submits a verification report to the IEPF Authority
5. The Authority processes the claim and credits the shares to your demat account and the amounts to your bank account

The process takes time and requires accurate documentation, but it works, and there is no deadline that extinguishes your right.

The document your family actually needs

Everything in this chapter reduces to one practical action.

Prepare a single document listing:

• Every bank account, with bank and branch
• Every demat account, with DP name, DP ID and Client ID
• Every mutual fund folio, with fund house and folio number
• Every insurance policy, with insurer and policy number
• PPF, NPS, EPF and small savings account details
• Property documents and where they are kept
• The nominee registered on each
• Where the original documents are stored
• Your will, if you have made one, and where it is

Keep it secure. Tell at least one trusted family member that it exists and where it is.

A list that nobody can find serves no purpose. Neither does an investment nobody knows about.