Quick answer: On death, shares in a demat account and mutual fund units are transferred to the nominee or legal heirs through a 'transmission' request to the depository participant or the fund's registrar. The nominee can receive the securities, but — as with bank accounts — the will generally decides who ultimately owns them. Listing each demat account and folio in your will, and keeping nominations consistent, avoids delays and disputes.
Key takeaways
- Describe each demat account by depository participant and each fund by AMC and folio.
- SEBI has required nominations (or an opt-out) for demat accounts and mutual fund folios.
- Heirs usually need a death certificate, their KYC and, without a nominee, succession documents.
- PNIS/NRI status of the heir affects which demat account type they need to receive shares.
How transmission works
With a registered nominee, the nominee submits a transmission form, death certificate and KYC. Without one, registrars commonly ask for a will with probate, a succession certificate, or indemnity and no-objection documents from other heirs depending on value. That is where the absence of a clear will hurts most.
How to describe investments in your will
Group them in an asset schedule: 'All units held in folios with [AMC name]', 'All securities in my demat account with [DP name]', 'My PPF account with [bank/post office]'. You can also give everything in a category to one person, or split by percentage.
For NRIs
US-resident heirs typically need an NRI demat account (repatriable or non-repatriable) to receive shares. They can open one after your death.
What this means if you live in the US
Indian mutual funds are commonly treated as PFICs for US tax purposes, which affects the heir's US reporting after inheritance. Talk to a US CPA; this is outside what a will can solve, but worth flagging for your family.
Frequently asked questions
- Does the nominee own my shares?
- Recent court decisions have generally treated nominees of securities as holding for the legal heirs or beneficiaries, not as absolute owners. Your will should state your intent.
- Can I leave different funds to different people?
- Yes, by naming the AMC, folio or demat account for each beneficiary, or by percentage of the whole portfolio.
- Is probate required to transfer shares?
- Not always. It depends on the registrar, the value and whether a nominee exists.