Most of us invest in mutual funds or other investment choices to help us reach our personal and family goals. But are you aware of the steps your loved ones must take after your passing in order to access mutual fund investments?
Transmission of mutual fund units is the procedure through which an investor's units are transferred following his or her death. Although there may be slight differences in documents and forms, fund houses all follow the same procedure for transmitting units.
While the procedure of transmitting mutual fund investments is quite straightforward, it might get complicated by the absence of registered joint holders or nominees. The transmission procedure serves as a reminder to investors that they should always name joint holders or nominees for all assets, keep track of those investments in their records, and tell beneficiaries of all investments.
Three cases can arise during the transmission of mutual fund units. Let us discuss all of them in detail.
In case of multiple holders
If a mutual fund investment was held jointly by numerous investors, the fund house will transfer the units to the second holder upon the death of the first holder. The units may be transferred to the nominee if there is only one holder. Along with the death certificate, KYC information, and bank account number, the second holder or nominee will also need to file a letter letting the third party know that the first unit holder has passed away.
In case of a single owner with a registered nominee
Following the demise of the single investor, the mutual fund units are given to the nominee. After the units are successfully sent, the nominee has the option of redeeming them or keeping their investment. You should be aware that the nominee does not 'own' the units of the mutual fund. Until the rightful successor takes them, it retains the units "in trust." To transfer the mutual fund unit units, the candidate must submit an application. Within 30 days, the fund houses transfer mutual fund units to the registered nominee.
In case of a single owner with no nominee
The mutual fund units are given to the legal heirs if there are no nominees or joint holders. The legal heirs must, however, provide the required documentation to back up their claims. It takes a lot of paperwork to complete this intricate procedure. The claimant must provide some additional documents in addition to the standard ones.
Through stock exchanges, many investors purchase mutual fund units in demat form. The mutual fund units shall be transferred to the holder who is still alive in the event that one of the joint holders passes away. A death certificate and an account closing form are required in this situation. The mutual fund units must be transferred to the new account in the same order as the surviving account holders. The surviving unit holder will need to create a new depository account if such an account is not already open.