Mutual Fund Nomination: Financial advisors strongly recommend that investors designate a nominee for their mutual fund units. This simplifies and streamlines the transmission of units to the beneficiary in the event of the investor’s demise. The deadline for this nomination has been extended to June 30.
Nomination involves appointing an individual to manage one’s assets in the event of death. According to regulations, it is compulsory for individuals opening new folios or accounts to nominate someone. If investors opt not to nominate, they must indicate this decision in the application form.
According to fund houses, a significant portion of mutual fund folios lack nominations, although the precise figure remains undisclosed. Previously, nomination was not mandatory for demat accounts and mutual funds, resulting in many investors neglecting these details.
Having a registered nominee facilitates the seamless transfer of funds to the nominee(s) in the unfortunate event of the investor’s demise. Conversely, in the absence of a nominee, the heirs or claimants must present numerous documents such as a Will, a legal heir certificate, and a no-objection certificate from other legal heirs to transfer the units into their name.
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Given that many investors do not draft a Will, the absence of a nominee complicates matters for the surviving family members, who must then prove their status as legal beneficiaries, a process that can be arduous. Otherwise, the funds in the mutual fund units may remain unclaimed.
The deadline for setting up a nomination for mutual fund schemes within folios has been extended to June 30. Investors must either establish a nomination for their holdings or choose to opt out by this date. If a nomination has already been registered, no further action is required. Moreover, for investors who hold mutual fund units in demat form, the nominee designated for the demat account automatically applies to their mutual fund holdings as well.
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Setting up a nomination is a straightforward process and can be completed online through the websites of registrar and transfer agents (RTAs), fund houses, or by using a physical form signed by the holders. If the mobile numbers or email IDs of the second holder are not updated with the fund house, investors may need to fill out a form to provide this information.
Depository participants, asset management companies (AMCs), and registrar and transfer agents (RTAs) are encouraging demat account holders and mutual fund unit holders to meet the nomination requirement or opt out of it. They are sending fortnightly communications via emails and SMS to those who have not yet complied with the nomination requirement.
