You might have been investing in Mutual Funds to ensure the financial well-being and security of your family. But in the event of your unexpected death in the future, here’s how you can ensure that your loved ones are able to avail the timely benefits after you.
Investing in Mutual Funds is one of the most popular ways of creating wealth that also provides for the financial well-being of your loved ones, long after your death. But while we apply a lot of careful thought and planning before making these investments, we often forget to put measures in place that will help our dependents claim and avail timely benefits post our demise.
Mutual Funds have the option for nomination, or opening joint accounts. As per law, a joint-holder, nominee or legal heir can claim the Mutual Fund proceeds after the death of the Mutual Fund investor. The process is known as transmission.
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Pattern of holding
Asset Management Companies (AMCs) have a standard procedure for transmission of units, although there might be a slight variation in formats or documents required across AMCs. If the sole holder or the first holder dies, the documents required are based on the pattern of holding and the current value of investments.
The nominee or legal heir should submit the required documents along with the letter requesting transmission of units to the AMC. It is necessary to contact every Mutual Fund house separately where the deceased person had investments. However, a single letter would be sufficient if all folios belong to a particular AMC and they are held in the same mode of holding.
As mentioned earlier, the mode of holding would decide the documents to be submitted along with the request. Let’s consider three scenarios here.
Transmission to surviving joint holders:
Mutual Fund units can be held jointly. If the first holder dies, the units can be transmitted to the second holder. This can be done by submitting a letter in the standard format along with the Death Certificate in original or photocopy notarized or attested by a gazetted officer or a bank manager.
If the surviving unit holder becomes the sole holder after transmission of units, it will be mandatory for him/her to make a nomination. In case the units are transmitted to the surviving unitholder/s, there are no tax implications. If they decide to redeem units, the tax rules with respect to short term/long-term capital gains will apply.
If the units are held singly with nomination:
In case the units are held singly with nomination and the sole holder dies, the nominee has the option of either redeeming the units or opting for transmission of units in his/her name. The request can be made by way of a letter in a format prescribed by the AMCs. The request has to be submitted along with the following documents:
- Death Certificate of the deceased unitholder in original or photocopy notarized or attested by gazetted officer or a bank manager.
- Bank account details of the nominee (in a standard format) attested by the bank manager along with a cancelled cheque bearing the name of the nominee.
- KYC of the nominee bearing PAN number and the name of the nominee. If the claimant is a minor, the following additional documents are needed:
- Proof of date of birth of minor nominee
- Letter from guardian declaring that he/she is the guardian of the minor and stating his/her relationship to the minor along with court order/decree, if applicable.
If the units are held singly without nomination:
If the units are held singly without nomination, the process can be tedious as apart from the documents mentioned above, some more documents will have to be submitted. These are:
Indemnity Bond from legal heir/s on stamp paper franked for value as applicable in the respective state of execution of the Indemnity Bond.
Individual affidavits from legal heir/s on stamp paper franked for value as applicable in the respective state of execution of the affidavit.
Now if the transmission amount is below the threshold limit, any appropriate document evidencing relationship of the claimant with the unitholder needs to be submitted. And if the transmission amount is above the threshold limit, a notarized copy of probated will/legal heir certificate/succession certificate/claimant’s certificate issued by a competent court or Letter of Administration in case of Intestate Succession needs to be submitted.
By any chance, if the nominee decides to get the units transferred, the tax liability, if any, will arise only at the time of redemption.
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Sometimes if the claimant’s name in the identity documents/bank record and AMCs record do not match, there might be a problem in transmitting or redeeming the units. Like for instance, the identity document carries middle name and AMCs’ record do not or vice-versa, or different spellings. So remember to check if the nominee’s details match his identity document at the time of mentioning the nominee.
While making Mutual Fund investments, remember to either keep someone in the loop about your investments or your nominees informed. Being unaware of your investments does no good either for you or your dependents who won’t be able to avail timely benefits post your demise.