Why does the appointed person not qualify for having a jointly held depository account? | Motilal Oswal

Person not qualify for having a jointly held depository account?

As with any accounts that you possess, nomination facilities are accorded in case of the demise of a holder of the account. An appointee, or a nominee, thus becomes an important factor when you open any account, and this is true for a Demat account too. However, what if you open a free Demat account which is concertedly, or, in other words, jointly held? Is a nominee applicable in such an account, you may ask yourself. It is worth the effort to find out. 

About Nominees and Demat Accounts

Most Demat account holders and their depository participants feel that there is a requirement to have a nominee in any Demat account, jointly or singly held. To open a free Demat account is an easy enough procedure, and you can open one with a joint holder. This means that, in case of the demise of any holder of the account, the joint holder who is alive should become the sole holder of the account. Therefore, all securities in the account get transmitted to the holder who is alive, in that given sole holder’s name. This is what you would expect. However, in India, there are two primary depositories, the CDSL and the NSDL, and they have laid down rules about procedures of demat investment transmission. 

If either a sole Demat account holder or any one joint Demat account holder is deceased, the free Demat account is frozen and becomes a non-operational account. This action takes place when the depository participant receives the news of the demise. In order for share transmission to take place, a brand new free Demat account must be created. This is done by the nominee that is mentioned for a sole Demat account holder, and by a joint holder in case of joint holders who open a free Demat account. In case there is no nominee for a sole holder’s account, the heirs, after a Will is authenticated by a competent court, can open a free Demat account for share transmission. 

The Case for the Nominee

In light of what you have just read, even if you do have a nominee in a joint Demat account, and one holder is deceased, the nominee has no role to play. This is because, in a joint or concertedly held Demat account, the joint holder who is alive has the authority to open a new Demat account in which shares will be transmitted. This is still the case if you open a trading account linked to your Demat account. Hence, the appointee or nominee is not applicable or relevant in the event that a joint Demat account exists. The nominee’s role in the case of a joint Demat account only comes into play if both or all joint holders are deceased. 

Demat Accounts

As you can tell, the case for the nominee in any jointly held Demat account, whether you open just a Demat account or open a trading account linked to it, is quite irrelevant. This is, of course, provided at least one concerted or joint holder is alive. You can explore a lot more about Demat accounts and how they work if you visit Motilal Oswal. Open a Demat account for free and forge ahead with your investments. 

Related Articles:  How to Add a Nominee to Demat Account? | How to Open a Demat Account Without a Broker | Importance of Monitoring your Demat Holdings Account | Procedure of Buying and Selling Shares Through Demat Account  

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