Updating nomination in jointly-held investments can be a pain; here’s what you need to do

You can have only one nominee for a bank account and up to three for a demat account and a mutual fund folio.

It always helps to have a joint holder for your financial investments—be it your bank account, demat account or mutual fund investments. And given that most transactions can be done online, the joint holders need not even be based in the same location.

But on one aspect, that is, updating nomination details, jointly-held investments can entail the involvement of all the joint holders. And while this may not necessarily require them to be based in the same location, some coordination may be required between them to get certain things done.

The Securities and Exchange Board of India has allowed time until September 30 for mutual fund investors and trading and demat account holders for updating their nominations—that is, either choosing a nominee or specifically opting out of nomination.

A nominee is important and, hence, mandatory for financial assets. “As a custodian, the nominee represents the legal heirs and plays an important role in the transmission process by making the deceased’s financial assets / funds immediately accessible to the family. The nominee is legally bound to pass on the assets to the beneficiary as per the deceased’s will or to the heirs of the deceased as per applicable succession laws,” says Rajat Dutta, founder, Inheritance Needs Services.

So, now is the time to take stock of your nominees across all investments, and update / modify them well before the September deadline. Here we focus on bank accounts, demat accounts (stocks, bonds, etc.) and mutual funds (held in non-demat form).

Bank accounts

Many banks allow you to update your nomination—changing a nominee or updating an existing nominee’s details—in one of two ways. You can either do this online (via the bank’s app or net banking) or by visiting a branch of the bank. This can be done both for single- and jointly-held bank accounts.

According to Bank of Baroda, in case of a bank visit, you have to submit only the nomination form (Form DA1). No other documents are required if your account is KYC (you’re your customer) compliant. Preferably, one must visit the branch where the account was opened. But you can also submit the nomination form at any branch, in which case the branch official will verify your details and send the scanned copy to the base branch for updating the nominee details.

“If you are updating your nomination by visiting a bank branch, then the bank will usually ask for the signatures of all the joint holders,” says Sonali Pradhan, head of wealth planning, Julius Baer India. It’s a bit different when done online. According to Pradhan, the primary account holder can log into his or her net banking account and update the nomination online. The secondary holder, however, will not be able to do this.

What happens if the joint account holders are in different locations and are unable to update their nominations online? In that case, one of them will have to sign the nomination form and send it by post to the other account holder for him or her to sign and submit to the bank. “The nomination form must have the original signatures and cannot be scanned and shared over email,” says Pradhan.

Note that you can have only one nominee for a bank account (savings and fixed deposits) and up to three for a demat account and a mutual fund folio. In case of more than one nominee, the sum of the shares of all the nominees must add up to 100 percent.

Also read: Why a nominee should never be an ultimate beneficiary

Demat accounts

When it comes to a demat account, changes in nomination when the account is the name of only one person can be done online.

But for a jointly-held demat account, any change requires the consent of all the joint holders and so, this cannot be done online. This, according to Pradhan, is because a demat account by default is held under ‘joint’ mode. This is different from how it is for jointly-held bank accounts and mutual fund folios where you can opt for ‘joint’ or ‘either or survivor’ mode.

According to Puneet Maheshwari, director, Upstox, a new-age stock broking firm, too, any addition or modification of nominee can be done online for a singly-held demat account. Talking about how this works at Upstox, he says “You will have to login to our app or website using two-factor authentication. Once you modify the nominee details and enter the OTP (one-time password) received, you can submit your request. Once we process your request, you will be able to view the updated nominee details within 24-48 hours in your profile section.”

What happens when the demat account is jointly held? Maheshwari says that in that case, the account opening process itself is offline, so any addition or modification in the nominee details has to be done offline. “But the physical form can be couriered to us and does not require the presence of all the joint holders. We verify the signatures with our database. If they match, we update the nomination details.” He adds that they are exploring the option of providing multiple OTPs for all the joint holders in the same flow to make this process online.

Going by the Zerodha website too, you can add a nominee to a joint demat account only via the offline route. You have to courier the signed nominee form, the account modification form and the ID proof of the nominee/s to the broker. When it comes to deleting a nominee, this cannot be done online, whether your Zerodha demat account is singly or jointly held.

Also read: Women’s day: Do not just leave your joint finances to your spouse. It's your money as well

Mutual fund investments

For jointly-held mutual fund investments (non-demat form) too, updating nomination may entail submission of physical forms. You are likely to face hiccups if you take the online route.

That said, depending on the mutual fund houses that you have investments with, you can start by trying to update your nominations on the websites of CAMS (Computer Age Management Services) or KFintech, or both. CAMS and KFintech are the two largest registrar and transfer agents (RTAs) in the mutual fund industry and enable you to update your nominations online.

If the online method fails, then the only way out is to submit physical nomination forms at the CAMS and KFintech offices. Furthermore, given that all the unitholders must consent to any nomination-related modification, the form must carry the signatures of all the joint holders. Read here for more details.

Conclusion

In the case of jointly-held demat accounts and mutual fund folios, any modification in nomination requires the involvement of all the joint holders. And this cannot be done online. Given this, it’s best to choose your nominees carefully at the start itself to save yourself the hassle of making any modifications later. This is especially so if the joint holders do not reside in the same location.

For your existing jointly-held demat accounts and mutual fund folios that do not have a nominee, make a one-time effort of updating your nomination to ensure a smooth transmission of your financial assets to your family.