How Can You Claim Mutual Fund Units After Death of the Holder?

Most of us invest in mutual funds or other investment options to achieve our individual and family member’s life goals. But do you know the process that your loved ones have to carry out to avail mutual fund investment after you die?

After you die, the fund houses transmit the mutual fund units to the surviving unit holders or nominees and legal heirs.

Unlike our previous generations, most of us don’t have any physical investment statements for our family members to find out after our death. Hence, your nominees or heirs must know your investments. Tell them the procedure that they need to follow after your death to take the best course of action.

While most fund houses have a standard procedure for transmitting mutual fund units, there might be a slight variation in the process among the different fund houses.

You can download the required forms and annexures from the mutual fund house’s website.

During transmission of units, three types of situations can arise:

1.Transmission of units to surviving joint holders

2. Nominee is registered

3. Nominee is not registered with the mutual fund

Here’s what you need to know and do in these three scenarios.

1.Transmission of units to surviving joint holders

If several investors jointly held the mutual fund investments, the fund house pass the units on to the second holder after the death of the first holder.

Here are the documents that would be required in such a scenario:

• Transmission Request Form (Form T2) for transmission of mutual fund investments to the surviving unitholder/s.

• Original death certificate or photocopy that is duly attested by a Notary Public or a Gazetted Officer is needed.

• The surviving unit holders need to provide a copy of the PAN Card if it was not provided earlier.

• Cancelled cheque of the new first unitholder with pre-printed name or recent bank statement or passbook of the new first holder needs to be submitted.

• If the surviving holders are not KYC compliant, KYC Acknowledgment or KYC Form must also be submitted.

2. Nominee is registered

The mutual fund units are transferred to the nominee after the death of the sole investor. The nominee may redeem the units or stay invested after the transmission of the units are successful.

However, you need to note that the nominee doesn’t ‘own’ the mutual fund units. It holds the units ‘in trust’ till the legal heir claims it. Legal heirs of the deceased investor may dispute the transfer of investments to the nominee. In that case, as per the SEBI Regulations, the units are held ‘in trust’ by the nominee till the issue is sorted.

The nominee needs to make an application to get the units of the mutual fund units transferred. The fund houses transfer mutual fund units to the registered nominee within 30 days.

There can be multiple nominees as well. In this scenario, each nominee will receive a portion of the mutual fund units as per the instructions set by the unitholder.

Here is the list of documents:

• The Transmission Request Form (Form T3) for transmission of units to the nominee(s) is required.

• Suppose the amount is up to Rs.2 lakh. In that case, the bank manager needs to attest to the nominee’s signature as per Annexure-Ia. If the nominee is minor, the signature of the guardian is to be attested in the form.

• Suppose the transmission amount is over Rs.2 lakh. In that case, the notary public or a Judicial Magistrate First Class (JMFC) needs to attest the nominee’s signature. The attestation goes in the space provided in the form under the signature of the nominee.

• The claimant should submit original death certificate or photocopy that is attested by a Notary Public or a Gazetted Officer.

Nominee’s cancelled cheque or copy of the nominee’s recent bank statement or passbook is required.

• Copy of the birth certificate needs to be provided if the nominee is minor. Also, KYC Acknowledgment or KYC form of the nominee(s) or guardian is also required in such a situation.

A nominee is not registered

If there are no nominees or joint holders, the mutual fund units are transferred to the legal heirs. However, the legal heirs need to support their claims with the necessary documents.

This process is complicated and requires several documents. Besides the regular documents, there are a few documents the claimant needs to provide.

If the transmission amount is below or Rs 2 lakh:

• Documents that establish the relationship between the claimant/s with the deceased investor/s

• Bond of Indemnity – as per Annexure-II so that the units are transmitted without production of legal representation.

• Bond of Indemnity is not required if the legal heirs have submitted the Succession Certificate or Probate of Will or Letter of Administration where the claimant is named as a beneficiary. This means that an affidavit per Annexure-III from such legal heir/claimant(s) is sufficient.

• Each heir needs to give an individual affidavit as per Annexure-III.

• NOC from other legal heirs as per Annexure-IV is required whenever it is applicable.

If the transmission amount is more than Rs 2 lakhs:

Individual Affidavits are needed from each legal heir as per Annexure-III.

The claimant also needs to submit any one of the documents mentioned below:

• Notarized copy of Probated Will or

• Succession Certificate issued by a court

• Letter of Administration or court decree if there is no will

Conclusion

We don’t know what the future holds for us. However, we can take actions that may make it easier for our loved ones to access our investments after our death. Hence, it is essential to add a nominee and make them aware of the procedure.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.