BACK TO BASICS. With the last date for making nominations to MF investments fast approaching, here’s why it is important.
While making new investments, investors are often in a hurry to complete the procedure and, thereby, overlook important as
pects such as nomination. Little do they know that this lapse can force their family to move from pillar to post to claim the same investments in the event of death of the original investor. To address this issue, market regulator SEBI brought out a circular specifying norms regarding the MF nomination process with an aim to standardise it. Under this, December 31, 2023, is the last date for making nominations in your folios.
Read on to know more.
Asset management companies should provide those investing fresh in MFs with the choice of either providing nomination, or opt out of nomination by signing a declaration form. For existing investors, the end of this year is the deadline for completing the nomination process, failing which their accounts will be frozen for debits and investors will not be able to redeem their investments. SEBI has extended
the deadline for the same from September 30, 2023. Investors can either fill a physical nomination form with their own signature or use eSign facility for online option.
Nomination enables MF unit holder(s) to propose a person, who can claim the units, or the redemption proceeds, in the event of death of the unitholder. In case of a joint MF account, each unit holder’s approval is required for nomination. A nominee acts as a custodian of the asset in the event of death of the investor. A maximum of three nominees can be appointed. Each nominee can be assigned any percentage of the
investment. Changes in nomination can be made at any point in time. Nomination can also be made in favor of the government, local authority, any person designated by virtue of his/her office or a trust. Do note a company, partnership firm, HUF, society or a trust (other than a religious or charitable trust) can’t become a nominee. In case of a conflict of owner ship, the Will shall be considered the final deciding factor. Fund houses may transmit units to the nominee upon the investor’s death, but if the nominee(s) and the legal heir(s) are different and there’s dispute on ownership, the matter has to be resolved in court.
WHY IT IS IMPORTANT
In the absence of a nominee, MF units shall be transferred to the legal heir as mentioned in the Will by the deceased owner. But the whole process could be lengthy, costly and cumbersome. In case a nomination is made, the nominee shall complete the formalities such as KYC process, submission of documents including proof of death , signature of the nominee duly attested and proof of guardianship in case the
nominee is a minor.
There are three types of claimants — joint MF account holders, nominee(s) or legal heirs. In case of a joint MF account, after the death of the first holder, units shall be transferred to the other surviving holder(s). In case of death of the joint account holders, units can either be
transferred to the nominee(s) or to the legal heirs if nomination is not made. In case of a single MF account, the units shall be transferred to the nominee, or to the legal heir if there is no nominee. If nomination details are available, then one has to furnish letter from claimant requesting trans mission, notarised death certificate copy, Aadhaar card, PAN card etc. Where nomination has not been done, additional documents such as indemnity bond(s) and individual affidavit(s) by legal heir and notarised copy of probated Will, among others, have also to be submitted. The above procedures can vary if the trans mission amount is more than ₹2 lakh.
Courtesy: Business line Dt.24th Dec. 2024
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