Transmission of mutual funds on death

The units are transferred to the surviving unit holder, nominee or legal heir

We strive hard to save money for securing the financial future of our families. We also plan finances and investments to take care of the family needs in our absence. It is equally important that the legal heirs inherit the assets without hassle.

In the case of mutual fund investments, the units held by the deceased holder are transferred to the surviving unit holder or nominee or the legal heir; this process is known as transmission. In case of multiple unit holders, in the event of death of the first unit holder, the units are transferred to the surviving unit holders. If there is a sole unit holder, the mutual fund units are transferred to the registered nominee. In case of a single unit holder, where the nominee has not been registered, the legal heir will have to claim the units by producing necessary documents and proving heirship.

Role of nominee

Fund houses typically ask for nominee registration at the time of investment. A nominee is an individual, pre-decided by the unit holder, in whose name the units will be transferred upon death of the unit holder. The nominee can either be the legal heir who will inherit the investment on death of the unit holder or a caretaker of the assets until it is claimed by the unit holder’s legal heir/s or transferred to them according to a predetermined will.

For instance, if the legal heir is a minor, the nominee will be responsible for the investment till the legal heir completes 18 years of age, post which it will be transferred . Registration of nominee can be done either at the time of investment or subsequently.

Individuals can register up to three nominees for a folio; this is useful when the nominees are also legal heirs. One can specify the quantum of share for each nominee. In case there is no mention of the proportion, all the nominees will receive an equal share.

Documentation

The documents needed for transmission varies under different situations.

Let us first take the case of a single unit holder. In case the deceased unit holder has registered his nominee, the transmission of units to registered nominee is relatively simple.

The nominee, who is the claimant seeking transmission of the units, has to submit a letter to the asset management company (AMC) or registrar and transfer agents (RTAs).

Along with the letter, he has to submit the original death certificate or notarised or attested photo copy of the same.

Also, the nominee’s bank account details attested by the bank manager or a cancelled cheque or bank statement or pass book bearing the account holder’s details need to be submitted.

But what if the deceased unit holder was the sole investor and the nominee was not registered? In addition to the documents mentioned above, the claimant (legal heir/s) will also have to furnish the indemnity bonds and individual affidavits.

If the amount of investment is below a certain threshold level, documents evidencing the relationship of the claimant with the deceased unit holder need to be provided. If the investment exceeds the threshold, the claimant has to submit any of the following documents — notarised copy of the probated will or legal heir certificate/succession certificate/claimant’s certificate issued by a competent court or letter of administration in case there is no will.

The threshold limit could vary across fund houses. For instance, while HDFC Mutual Fund has ₹5 lakh as the threshold limit, it is ₹2 lakh for SBI Mutual Fund and UTI Mutual Fund.

If the units have been held by two or more individuals jointly, the surviving unit holders have to give a letter requesting transmission of units along with either original or notarised/attested copy of death certificate of the deceased unit holder.

This needs to be submitted along with bank account details of the second unit holder (who will now be the new first unit holder) along with an attestation by the bank branch or cancelled cheque or bank statement or pass book bearing the accountdetails.

The writer is co-founder, Rana Investment Advisors

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