Know about nomination in mutual fund schemes

Under Regulation 29A of SEBI Mutual Funds Regulations, 1996, Fourth Schedule, the nomination is a facility provided by the fund house to an individual unitholder (including the sole proprietor of sole proprietary concern) or all joint unitholders, if the Units are held jointly by more than one person.

What is nomination in mutual fund schemes?

The Nomination is a process to appoint a person, who can take care of assets and is entitled to the Units held by the unitholder or the redemption receipts thereof on the death of the unitholder or all the joint unitholders.

For opening new folios/accounts by individuals with the single mode of holding, nomination facility is mandatory. At present, fund-houses do not allow new folios/accounts for individuals in single holdings without nomination. In case of joint holdings with more than one holder, the nomination is not mandatory. Still, financial planners recommend that new folios should always have a nominee.

Why appointing a nominee for your mutual fund investment is vital?

The nomination makes the transfer of funds to the near and dear ones, that is, the nominee(s) of unitholder, simpler, hassle-free with minimal documentation in the event of the death of the investor. Thus the nomination facilitates the smooth transfer of funds to the nominee(s) on the death of the investor. In the absence of nominee, several documents like will of the deceased person, legal heir certificate as per succession law, no-objection certificate from other legal heirs, etc., will have to be produced by the heirs/claimant to get the units transferred to the account of legal heir(s), and that is a very lengthy and straining procedure.

What is the process of making a nomination?

At the time of investing in a mutual fund for purchasing units, the ‘Nomination’ section is provided in the account opening application form, where an investor can furnish the nominee details. Individual investors holding accounts either singly or jointly can make a nomination.

Who can be a nominee?

A nominee can be any person and even a minor. If the nominee is a minor, the guardians of the minor will exercise control over the mutual funds until the nominee becomes 18 years old or attain the age of majority as stipulated. Transaction/s made by the guardian during the period when the nominee is a minor has to be ratified by the minor after attaining the age of majority.

In a mutual fund, investor(s) can also have multiple nominees and specify the percentage to be given to individual nominees as per their preference. However, in the event of the death of any of the holders, the benefits will be transmitted to the surviving holders. The nominee will be entitled to the benefits only in the case of the death of all the unitholders.

A non-resident Indian (NRI) can also be a Nominee subject to the exchange control rules in force.

Nomination can also be done in favour of the Central Government, State Government, a local authority, a religious or charitable trust, or any person designated by his/her office.

Who cannot be a nominee?

A company/body corporate, Hindu Undivided Family (HUF), partnership firm, society, or a trust (except a religious or charitable trust) cannot be nominated.

How many nominees can an investor appoint?

In a mutual fund folio, an investor can register up to three nominees. However, the investor(s) need to specify the percentage of the amount in favour of each nominee in case of his death, and such allocation/share shall be in whole numbers without any decimals. In the event of the percentage not being specified, every nominee will be eligible for an equal share.

Who can nominate?

Only individuals (including the sole proprietor of a sole proprietary concern) can nominate.

Who cannot make a nomination?

A Power of Attorney Holder (PoA) and the guardians of minor investing in mutual fund units on behalf of a minor cannot nominate.

What if, as an investor, you do not wish to appoint a nominee?

In this case, the investor must sign and indicate the same by signing on the requisite space.

Can a nomination made be changed or cancelled?

The nomination once made by an investor can be changed/added/subtracted anytime subsequently and any number of times. A new nomination request will automatically cancel the existing nomination and replace the same by fresh nomination. Cancellation of nomination can only be made by unitholders who made the original nomination, singly or jointly. On cancellation of the nomination, there shall not be any obligation on the part of the Mutual Fund to transmit the units in favour of any of the nominees.

What if the nomination was not made in your existing investments?

If there was no nomination in your previous investments, you can add a nominee to the existing mutual fund folio easily by filling a form and submitting it to the fund house.

How can the nominee claim the units?

After the death of the unitholder(s), to claim the units, the nominee has to complete the necessary formalities including proof of death of the unitholder, completion of the KYC process with the signature duly attested, furnishing of proof of guardianship in case the nominee is a minor, and other necessary documents.

You invest to gain a financial advantage in your life as well as to secure the financial gain of your loved ones in your absence by a simple settlement procedure. Nomination facility fulfils this objective and takes care of your dearest ones, both financially and emotionally, at the critical moment of dealing with grief. So nominate whenever you invest without fail.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh / Enquire