Investing our money helps us achieve financial goals for ourselves and our loved ones. But what if the investor passes away suddenly? This raises concerns about who will benefit from the investments and whether family members can claim them after the investor’s death. These questions are common as death is inevitable. Do note that Mutual fund units can only be transferred to another person after the death of the investor.
When a Mutual Fund investor dies, provisions are in place to ensure that legal heirs or nominees can claim the deceased’s investments. This process is called the transmission of units.
This article explains the process for claimants like joint holders, nominees, or legal heirs to transfer Mutual Fund investments after the investor’s death.
Three types of claimants can claim for transmission:
• Joint Account Holders
• Nominee(s), and
• Legal Heirs
The process is similar, but documentation and procedures may differ based on the type of claimant and Mutual Fund holding.
The type of Mutual Fund account also influences the transfer process. In India, there are joint accounts and sole accounts.
For Joint Accounts:
• After the first holder’s death, investments can go to the surviving joint account holders.
• If all joint holders pass away, the nominee receives the investments.
• If no nominee is registered and all joint holders die, the legal heirs claim the investments.
For Sole Accounts:
• With a registered nominee, Mutual Fund units go to the nominee.
• Without a nominee, the legal heirs can claim the investments.
• In case of multiple nominees or legal heirs, the investments are divided based on the nomination documents or probated ‘will’ instructions.
Documents required to transfer mutual fund units to a joint holder or nominee:
If the person who invested in mutual funds has passed away and had a joint account or nominated someone, the joint holder or nominee can request the transfer of investments. They need to submit a few important documents which are listed below:
• A letter from the person making the claim, asking for the transfer of units, or a transmission request form.
• A notarized copy of the death certificate of the person who passed away.
• KYC documents of the person making the claim, like Aadhaar Card, PAN Card, etc.
• KYC documents of the guardian, along with the birth certificate of the nominee if the nominee is a minor.
• Bank account details of the person making the claim, such as a cancelled cheque or an attested copy of a bank statement/passbook.
• If the claim is made by a joint holder or a registered nominee, submitting only these documents to the fund house is enough.
Documents needed for legal heirs to claim the transfer of mutual fund units:
If the person who invested in mutual funds didn’t nominate anyone, the legal heirs can submit a claim for the transfer. If the investments were made through a joint account, the legal heirs can only claim the transfer if all joint holders have passed away, and there is no nomination.
When a legal heir applies for the transfer of units, they need to provide a few extra documents to complete the process:
• Indemnity Bond(s) signed by the legal heir(s)
• Individual Affidavit(s) by legal heir(s)
• Notarized copy of the probated will or a copy of the succession certificate
These documents are in addition to the ones mentioned earlier. So, legal heirs have to submit more paperwork to transfer investments after the investor’s death if there is no joint holder or registered nominee.
Process Time: The fund house usually completes the transmission within 30 days after receiving all required documents.
Understanding Taxes When Transferring Mutual Fund Units:
If you transfer mutual fund units to a joint holder, nominee, or legal heir after the original investor has passed away, Capital Gains Tax is not applicable. This is because the transfer does not involve selling or switching units between different schemes.
But, keep in mind that any profits made from selling units or dividends received after the transfer might be subject to Capital Gains Tax or Income Tax as per the rules in place at that time. So, even though the transfer itself does not trigger taxes, other transactions afterward might have tax implications.
Conclusion:
Planning for the inevitable is crucial. While investors can grow wealth without joint holders or nominees, having them makes it easier for loved ones to benefit from the investments in the long term.
FAQs
Q1. How can I transfer mutual fund units to a Demat account?
To transfer mutual fund units to a Demat account, follow these steps:
- Open a Demat Account: Make sure you have a Demat account with a registered Depository Participant (DP).
- Link Your Mutual Fund Account: Connect your mutual fund portfolio with your Demat account. This might involve submitting a request to your mutual fund registrar or using the online portal.
- Initiate the Transfer: Log in to your mutual fund account and choose the option to transfer funds. Select the Demat account as the destination.
- Provide Details: Enter the details of the mutual fund scheme you want to transfer and the Demat account details.
- Confirm and Submit: Review the details, confirm the transfer, and submit the request. The transfer process may take a few days.
Q2. Can I transfer mutual funds from one broker to another?
Yes, mutual fund units can be transferred from one broker to another. To initiate the transfer:
- Fill Transfer Forms: Complete the necessary transfer forms provided by both the current and new brokers.
- Clear Dues: Make sure all dues with the current broker are cleared before initiating the transfer.
- Submit Forms: Submit the account closure form to the current broker and the new account opening form to the new broker.
- Transfer Process: Both brokers will facilitate the transfer process, including updating records and transferring units.
Q3. Which regulating bodies oversee mutual fund transfers?
The regulating bodies for transferring mutual funds are the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI).
Q4. Can mutual fund units held with depositories in physical form be transferred between unit holders before death?
No, mutual fund units held in physical form cannot be transferred directly before the unit holder’s death. The units must be in Demat form for transfer. In cases of inheritance or transmission, the nominee or legal heir can claim ownership, following the required documentation and procedures outlined by SEBI and AMFI.
Leave a Reply