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It is always advisable to file a nomination while investing in a mutual fund. However, sometimes investors forget to enter the name of the nominee unknowingly or in the old folio. In such a situation, if the original investor (unitholder) dies suddenly, the biggest fear in the minds of the family members is whether their hard-earned money will be lost. According to the rules of financial regulator SEBI (SEBI) and Association of Mutual Funds (AMFI), investor’s money never goes waste. There is a well-established legal process to transfer mutual fund units in the name of legal heirs in the absence of a nominee, which in technical language is called ‘Transmission of Units’.
Before starting the process, it is important to clearly understand the difference between nominee and legal heir. In the eyes of law, the nominee is merely a trustee or custodian, whose job is to receive the funds safely and deliver them to the rightful legal heirs after the death of the investor. If the investor had not made any nominee, then the first class legal heirs (such as spouse, children and mother) under the investor’s will or succession law (Hindu Succession Act, Indian Succession Act etc.) become the rightful owners of the deposited capital. If the investor has left a valid will, the process becomes quite simple; Whereas in case of intestate, the legal heirs have to present the claim through mutual consent and necessary affidavits.
SEBI and fund houses have divided the claim process into two slabs for the convenience of the families of small investors. If the total investment value across all folios is up to Rs 5 lakh (Rs 2 lakh in some fund houses), the claim process is completed even without complicated court documents. For this the family has to submit the following documents to the Asset Management Company (AMC) or Registrar like CAMS/KFintech:
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Transmission Request Form (Form T3): Application form duly signed by all the legal heirs.
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Death Certificate: Notarized or attested copy of the death certificate of the original investor.
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KYC and Bank Proof: PAN card, Aadhar card, fresh KYC and canceled check of the legal heir making the claim.
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Indemnity Bond: Indemnity letter signed by all the legal heirs on non-judicial stamp paper.
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No Objection Certificate (NOC)/Resignation Letter: If there are more than one legal heir and the money is to go into the account of one, notarized NOC of the remaining heirs.
If the total market value of an investor’s mutual fund folio exceeds Rs 5 lakh and no nominee is filed, fund houses ask for stronger legal proof for security reasons. In such a situation, it is mandatory for the legal heirs to submit any one of the three documents given below as main proof:
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Succession Certificate: Succession certificate issued by a competent civil court, clearly mentioning the respective mutual fund units or movable property.
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Probate of Will: If the investor had made a will, a copy of the will certified and accepted by the court.
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Letter of Administration: If there is a dispute, the official order of the court-appointed estate administrator.
Along with these court orders, the heirs have to submit their KYC documents, PAN card, bank account details and Form T3.
Legal heirs must proceed in an orderly sequence to complete the transmission process:
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Step 1 – Identification of all folios and CAS: First of all, download the Consolidated Account Statement (CAS) from CAMS, KFintech or NSDL/CDSL using the PAN number of the deceased investor to get accurate information about all the active mutual fund schemes.
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Step 2 – New Bank Account and KYC: The legal heir making the claim must have an active single bank account and updated KYC, as the units are credited only in the new folio of the heir after transmission.
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Step 3 – Application Submission: Submit all required original affidavits, stamped bonds, death certificates and forms in person at the nearest Official Service Center (POS) of the concerned fund house or office of CAMS/KFintech.
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Step 4 – Transfer and Redemption of Units: After verification of documents (which usually takes 15 to 30 working days), the units are transferred from the name of the deceased to the folio of the legal heir. After this, if the heirs wish, they can keep those units invested or can redeem them and get cash directly in their bank account.
The easiest and safest way to save your family from the hassles of court processes, stamp papers and lawyers is to add a nominee to each mutual fund folio and demat account well in time. Today, up to 3 nominees can be added in just 2 minutes through OTP based online e-sign on almost all mutual fund platforms, fund house websites and CAMS/KFintech portals. A little effort done on time can keep your family members completely safe from unnecessary legal and financial complications in adverse circumstances.