Essential guide to Mutual Fund nomination

Mutual Fund nomination is a crucial aspect of investing. Imagine the uncertainty your loved ones might face in the event of your unexpected demise. Without a clear nominee for your mutual funds, they could be entangled in lengthy legal processes to claim what is rightfully theirs. By ensuring you have a nomination in place, you provide a path for your family to access and manage your investments, offering them financial security during challenging times.

Understanding Mutual Fund nomination

Mutual Fund nomination is a process where you, as an investor, appoint a person who will receive the benefits of your Mutual Fund investments in case of your demise. This legal arrangement ensures that your investments are transferred to your nominee without any legal hurdles.

The nominee could be a spouse, child, parent, or any trusted individual. It’s a simple yet vital step to protect your investments and provide financial stability to your loved ones. The nomination can be made at the time of investment or updated later as per your wishes, offering flexibility and peace of mind.

Importance of Mutual Fund nomination

Smooth transition: Mutual fund nomination ensures a smooth transition of investments to the nominee without complex legal formalities. Upon the investor's death, the nominee can directly claim the funds, saving time and reducing the administrative burden on the grieving family.
Avoiding dispute: Clearly stating who should receive the funds helps avoid disputes among family members or other claimants. Without a nomination, asset distribution can lead to disagreements and legal battles, straining relationships and prolonging settlement.
Quick access: Nominees can quickly access funds, crucial for meeting immediate financial needs after the investor's demise. These funds can cover urgent expenses like medical bills, loan repayments and daily living expenses, providing financial security to your family.
No probate: Mutual fund nomination bypasses the need for probate, which is a lengthy and costly process. Nominating a beneficiary ensures the funds are transferred promptly and directly to the nominee, avoiding delays and expenses associated with probate.

How to nominate someone in Mutual Funds

Nomination can be done either online through RTA or fund house websites, or offline, via the following steps -

Obtain the mutual fund nomination form from your fund house or download it from their website. Fill in all the required details accurately. Include the nominee's full name, relationship with the investor, date of birth and contact information. Ensure these details are accurate to avoid any issues later.
The nomination form must be signed by the investor and witnessed by two individuals (if done offline). This adds an extra layer of authenticity to the document.
Submit the completed and signed nomination form to the fund house.

Who can nominate, and who can be a nominee?

Eligibility for nomination: Any individual holding a mutual fund investment, singly or jointly, can nominate one or more persons, including resident and non-resident investors. As per SEBI regulations, you can nominate up to 3 individuals to your mutual fund account. These nominees can be family members or dependents, ensuring your assets are transferred to the right people.

Eligibility to be nominee: To be eligible as a nominee, the following criteria must be met:

The nominee must be an individual, not an institution or organisation.
If the nominee is a minor, you must appoint a guardian who will manage the funds until the minor reaches adulthood.
NRIs can also be nominated, provided they comply with the exchange control rules in force at the time.
A nomination can also be made to the Central Government, any state government, local authority, or any person designated by virtue of their office, or to a religious or charitable trust. However, companies, partnership firms, Hindu Undivided Families (HUFs), and societies or trusts that are not religious or charitable cannot be nominated.

What happens in the absence of a nomination

In the absence of a mutual fund nomination, legal heirs must undergo a complex and time-consuming legal process to claim the investments, often requiring a succession certificate or probate. This can be costly, lead to delays, and cause disputes among family members.

Benefits of adding a nominee to your mutual fund

Smooth settlement process:Having a nominee simplifies the settlement process, ensuring the funds are transferred without any legal hurdles. The designated nominee can directly claim the investments, avoiding the need for extensive documentation and court procedures.
Reduces family conflicts: By clearly specifying the nominee, it helps in reducing potential conflicts among family members regarding the distribution of assets. This clarity helps in mitigating misunderstandings and disputes during a stressful period.
Eliminates the need for a will: Having a mutual fund nomination online can eliminate the need for a will specifically for your mutual fund investments, streamlining the process and ensuring that your investments are distributed as per your wishes, without any legal disputes.

Also Read:Retirement planning with Mutual Funds

Conclusion

Ensuring that you have a nominee for your mutual fund investments is a vital step in safeguarding your financial legacy. By designating a nominee, you facilitate a smooth transfer of your assets, prevent potential family disputes, provide immediate financial support to your loved ones, and avoid the complications of probate. It's a simple yet powerful way to ensure that your hard-earned money benefits those you care about most.

Axis Bank offers a convenient facility to invest in mutual funds online, allowing you to manage and update your nominee details seamlessly. This ensures that your investments are always aligned with your wishes, providing you with peace of mind and your loved ones with financial security.

This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.