Introduction  ​​​​​​​

Investing is a crucial means to attaining financial objectives and providing for family members. Mutual funds are one of the most preferred instruments to invest in India. It is considered to be a great means to build a retirement corpus, save money for long- and short-term goals, and grow your wealth. However, life can be unpredictable, unforeseen events, such as the demise of an investor, can disrupt plans. As a mutual fund investor, you need to know what happens to your investments in case of your passing and how your family can get access to the money.

This blog breaks down the process of transferring mutual fund investments after the passing of an investor and explains the methods by which nominees, joint account holders, and legal heirs can establish their claims.

Who Can Claim Mutual Fund Investments?

After an investor’s death, the follow individuals can claim the mutual fund units:

• Any individual who is a joint account holder with the deceased investor

• Any individual who is named as nominee by the deceased investor

• Any individual who is the legal heir (in case there is no nominee) of the deceased investor.

Procedure for Claiming Mutual Fund Investments

Although the general procedure for claiming mutual funds is similar, the exact method differs based on the type of claimant. Here’s a look at each option in brief.

• Claims by Joint Account Holder

The surviving account holder immediately gets the mutual fund units if the deceased investor had a joint account. If both joint owners die, the units are transferred to the nominee. If the deceased investor has not appointed a nominee, the legal heirs can claim the investment.

• Sole Account Claims

In case of sole accounts, the nominee gets access to the mutual funds upon the investor's death. In case if a nominee is not registered, the legal heir of the deceased can claim the investment.

In case of multiple nominees or legal heirs, the investments are distributed in accordance with the percentages that are provided in the nomination form. In the event that a valid will is not present, all legal heirs are bound to receive fair parts of the assets.

Documents for Mutual Funds Claim

In case of joint account holders and nominees the following information is needed:

• An official letter or a transfer request form.

• Notarised copy of the investor's death certificate.

• KYC documentation for the claimant.

• If the nominee is a minor, then KYC records of the guardian and birth certificate of the nominated minor.

• Cancelled cheque, bank statement, or other bank information.

In case if the legal heirs are claiming the mutual fund, they need to submit all the documents mentioned above, along with:

• Every lawful heir's individual affidavit.

• Notarised copy of the succession certificate or will.

• Indemnity bond signed by all legitimate heirs.

Transfer Process

• Approach the Mutual Fund Company

Reach out to the relevant mutual fund company where the deceased investor held their portfolio. The investment may span across several folios, so you may have to contact every applicable fund company for the status.

• Submit Paperwork

The claimants must formally ask for the mutual fund units to be transferred to them, alongside all necessary paperwork. Processing the folio in time depends on adherence to the mutual fund house's compliance policies.

• Multiple Claimants

In case of multiple nominees or legal heirs, the directives provided in the deceased investor's will are followed. In case if there is no will, investments are equally distributed among legal heirs.

Tax Obligations:

Although inherited mutual fund units are exempt from capital gains tax, all income generated from the earnings is subject to taxation. Gains from dividends or the sale of inherited units are liable to capital gains tax, based upon the holding term. For more information about your tax liabilities, it is best to speak with a tax professional.

Conclusion

Investments in mutual funds signify your financial strategy. In case of your untimely demise, your legitimate claimants—whether joint account holders, nominees, or legal heirs, get access to your investments. To enable that, you need to follow the procedure of appointing your nominee and legal heirs. The process to claim your mutual funds by your nominees/heirs post your demise is extremely simple, as long as they are able to provide necessary documentation needed for due diligence.

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