What will happen to your Mutual Fund Investment after you are gone?
Source/Contribution by : NJ Publications
We save and invest throughout our life for our future and our goals. We invest for buying our dream house, for our kids education, marriage, for a peaceful retirement, and the like. And we also understand the uncertainty quotient attached to our lives. For this reason, we try to secure our dependents' future with insurance, so that in event of our untimely death their goals are not compromised for lack of money. On the same lines, it is also essential to ensure that our dependents get the full and timely benefit of our investments.
Mutual Funds have gained popularity over time because of the innumerable benefits attached, including easy and hassle free operations, be it investing, redeeming or switching investments. Mutual funds provide the option of having accounts in joint names and to provide for nominees, to ensure a smooth Transmission process, i.e. the process of passing on the unitholders' investments to their dependents. It is a very simple process when there is a nominee, or when there are joint holders.
Whether your dependents wish to hold on to, continue investing or redeem the investments, after you, the first step would be transmission of the units in their names. So, we have the transmission procedure detailed below:
The transmission process is dependent upon the holding pattern and the registration status of nominees, if any, so there will be a different process to be followed under different scenarios.
Scenario 1: When the investment is held jointly
When a Mutual Fund investment is jointly held by 2 or 3 holders, then in the event of death of the primary holder, the other holder/s will have to transmit the investment in their name, and it becomes mandatory for them to appoint a nominee. The transmission process is simple, the other holder/s have to submit a letter (in a prescribed format) to the AMC along with a Death Certificate of the deceased unitholder in original or a notarized copy attested by a gazetted officer will also do. In case the bank and KYC details of the other holders were not submitted earlier, then the related documents will also be required.
Scenario 2: When the investment is held singly, with a Nominee/s registered
When there was a single unitholder and the investment is to be transmitted in a nominee's name, then to create a new account in his/her name, along with the above, the following are required:
> Bank account details of the nominee, along with a Cancelled Cheque
> PAN Number and KYC details of the nominee
Where the Nominee is a minor, then the following additional documents will be required:
> Proof of date of birth of the minor nominee
> A letter from the guardian, stating the minor's custody and his/her relationship with the guardian, along with a court order, if applicable.
Scenario 3: When the investment is held singly, and there is no Nominee:
The transmission process becomes a 'task' when there is neither a joint holder nor a nominee. In this case the claimant's will have to submit the details and documents as described in Scenario 1 and 2 above, along with the following additional documents:
> An indemnity bond from the legal heir/s on a stamp paper, franked for value as applicable in the respective state of execution of the Bond.
> Individual affidavits from the legal heir/s on a stamp paper, franked for value as applicable in the respective state of execution of the affidavit.
To note, if the transmission amount is less than the threshold limit (set by the AMC), then the claimant will be required to submit a document proving his/her relationship with the deceased unitholder. The process gets further complicated if the transmission amount is greater than the threshold limit, the claimant will have to submit a notarized copy of the probated will or a legal heir certificate, in this case.
1. Looking at the tedious process in Scenario 3, it is advisable to always keep your mutual fund investment either in joint name or register a nominee.
2. Many times what happens is, nominees are unaware of investments made or of any nomination thereof. There are various anecdotes which narrates of instances when after a long time after the death of the investor, his old wife or kids came across the MF investments of the dead husband or father, as the case may be, and those untouched investments made them rich overnight. But your family might not be lucky enough, and they may never come across your investment, or at least when they need it the most. It is extremely important that your dependents know about the investments so that they can get your investments' value in time, if need arises, so you must always Keep them in the Loop.