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Posthumous Claiming of Mutual Fund Units: A Guide

Navigating the financial aftermath of a loved one’s passing can be a complicated process, particularly when it comes to investment assets like mutual funds. Understanding this process is crucial for both investors and their heirs. See below for the Things to Know About Transmission of Mutual Funds in detail.

Things to Know About Transmission of Mutual Funds

When an investor passes away, mutual fund units are typically transferred to surviving unit holders, nominees, or legal heirs. In today’s digital age, most investments are held electronically, making it important for heirs to be aware of these investments and the necessary procedures to access them.

Variations in Mutual Fund Houses Procedures

Despite some standardization, the transmission process can vary among different mutual fund houses. The required forms for the process can usually be downloaded from the respective fund house’s website.

Three Scenarios in Unit Transmission

During the transmission of units, three scenarios may occur:

1. Units are transferred to surviving joint holders
2. A nominee is registered
3. No nominee is registered with the mutual fund

Let’s delve deeper into each of these situations.

Scenario 1: Joint Holders Survive

If the mutual fund investments were held jointly, the units are passed to the second holder upon the first holder’s death. The required documents in this situation include:

• Transmission Request Form (Form T2)
• Original or attested copy of the death certificate
• Copy of the PAN Card of the surviving unit holders
• Cancelled cheque or recent bank statement of the new first holder
• KYC Acknowledgment or KYC Form if the surviving holders are not KYC compliant

Scenario 2: Registered Nominee Exists

In the event of the sole investor’s death, the mutual fund units are transferred to the registered nominee. The nominee can then choose to either redeem the units or remain invested. However, it’s important to note that the nominee doesn’t ‘own’ the mutual fund units but holds them ‘in trust’ until the legal heir claims them. If any disputes arise, the units remain ‘in trust’ with the nominee until the issue is resolved.

Scenario 3: No Nominee Registered

In cases where no nominee is registered, the process can become more complex. The fund houses usually transfer mutual fund units to the registered nominee within 30 days. If there are multiple nominees, each will receive a portion of the mutual fund units according to the deceased unitholder’s instructions.

Transmission Amount Below or Equal to Rs 2 Lakh

When the amount to be transmitted is less than or equal to Rs 2 lakh, certain documents and procedures are required to ensure a smooth transition of the mutual fund units.

Required Documents

The documents needed include those that confirm the relationship between the claimant and the deceased investor. These can be legal documents such as marriage certificates, birth certificates, or any other official record.

The Role of Bond of Indemnity

Additionally, a Bond of Indemnity as per Annexure-II is required. This bond allows the transmission of units without the need for legal representation. However, if the legal heirs have already submitted a Succession Certificate, Probate of Will, or Letter of Administration wherein the claimant is named the beneficiary, the Bond of Indemnity is not necessary. In such cases, an affidavit as per Annexure-III from the legal heir or claimant is sufficient.

Affidavits and NOC

Each heir is required to provide an individual affidavit as per Annexure-III. If applicable, a No Objection Certificate (NOC) from other legal heirs as per Annexure-IV is also required.

Transmission Amount Exceeding Rs 2 Lakh

For transmission amounts exceeding Rs 2 lakh, the process becomes slightly more complex.

Affidavits from Legal Heirs

Each legal heir must provide an individual affidavit as per Annexure-III.

Additional Documentation

In addition to the affidavits, the claimant must submit one of the following documents:

• Notarised copy of the probated will
• Succession certificate issued by a court
• Letter of Administration or court decree in case there is no will

The Importance of Planning for the Future

While the future is uncertain, we can take steps to ensure our loved ones can access our investments with ease after our passing. One crucial step is to appoint a nominee and make them aware of the transmission process. This can provide peace of mind, knowing that your investments will be handled appropriately. This is the brief information about the Things to Know About Transmission of Mutual Funds in detail.

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