How To Add Or Change Nominee In Mutual Fund [Step by Step Process] (2024)

If there is one thing that we have learned from last year’s events, life is unpredictable. Therefore, the best thing we can do to secure ourselves and our loved ones is to be prepared for an unprecedented situation. A significant part of being prepared and planning for the future involves getting your finances on track.

Mutual fundshave been a go-to investment option in India. But there is one crucial aspect that most people tend to overlook about mutual funds –mutual fund nomination. If this topic sounds alien to you, we are here to help! We have put together a complete guide tonomination in a mutual fund. We will also talk about the process of adding amutual fund nomineeand the benefits you enjoy when youadd a nominee to a mutual fund.

What Is AMutual Fund Nomination?

Mutual Fund nominationrefers to appointing a person to take charge of your fund investments after your death. Appointing a nominee ensures that after your death, your Mutual Fund holdings will be transferred to your nominee. This process of transfer of Mutual Fund units of a deceased investor to a nominee is also known as thetransmission of units.

The nomination facility is available to single as well as joint unitholders. Moreover, a nominee can be a family member like your spouse or child, an NRI, or even a friend or acquaintance. You can also appoint a minor as the nominee or select a local authority, the central government, a charitable organization, or a person designated by virtue of their office. But bear in mind that a company or body corporate, partnership firm, Hindu Undivided Family (HUF), society, or a non-religious or non-charitable trust cannot be appointed as nominees. However, it is advised only to appoint a trustworthy person as yourmutual fund nominee.

Now that you knowwhat a nominee is and who can be a nominee in mutual funds, you must also know how to add one.

How To Add A Nominee In A Mutual Fund Online?

Usually, the nominee can be assigned at the time of purchase. You can simply add the name and personal details of the person you want to appoint on the application form in the separate section allocated for the Nomination facility. If you want to appoint a nominee to an existing investment, you can request the AMC (asset management company) for a nomination form. To add a nominee for your Mutual Fund investments, you can use thecommon nomination form for mutual funds provided by the AMCs. Key details that you need to provide in the nomination form are:

• Name of the nominee
• Date of birth of the nominee
• Nominee’s relationship with the investor
• Address of the nominee
• Percentage share of each nominee (if there is more than 1 nominee), etc.

You can add up to 3 nominees in one mutual fund folio and specify the percentage share that each nominee will receive in the event of your death. If you do not specify the percentage share, your Mutual Fund units will be equally distributed among all the nominees mentioned in the nomination form.

How To Change A Nominee In A Mutual Fund Online?

You may want to change the nominee of your mutual fund as per your changing personal situations and financial responsibilities. Mutual funds allow you to change the nominee of your Mutual Fund anytime you want using themutual fund nominee change form. You can also simply remove existing nominees.

For instance, consider a scenario where Aditi nominated her husband and two children as equal nominees on her mutual fund folio. However, five years later, she filed for divorced and removed her husband’s name from the list of nominees. As a consequence, her units are now equally distributed between her two children.

How To Check The Nominee In Mutual Funds?

You can check the nominee of your mutual fund online or request the details from the concerned AMC. We recommend revisiting your nominations after every major life event, such as marriage, divorce, loss of a loved one, etc. As overwhelming as some of these incidents can be, it is essential to keep your nominees up to date, so they reflect your current preferences at all times.

What Are The Benefits Of Adding A Nominee?

Nomination in mutual funds can have many advantages, such as:

• It offers a smooth settlement process:Adding a nominee ensures that your loved ones are secured in your absence. It removes uncertainty and ambiguity and ensures that your investments are passed on to the rightful heirs.
• It reduces family feuds:Mutual fund nominations allow you to add up to three nominees and specifically mark their percentage of share. This eliminates the scope of disagreements among family members. All your loved ones receive their allotted share, and there is no scope for fraud or feud.
• Removes hassles of producing a will: If you do not assign a nominee for your mutual fund folio, your family members may be asked to produce a will or a no-objection certificate to claim the mutual fund units. This can be an extremely harrowing and time-consuming process for a grieving family. However, proper nomination ensures that your loved ones get their rightful share without any delay.
• Lets you live stress-free: You can live a stress-free life with ample peace of mind knowing your money is safely invested and will go to the person of your choice after you.

Key Things To Remember About Mutual Fund Nomination

Here are some things that you must know of when adding a nominee to your mutual fund folio:

• Keep the nominee the same as the beneficiary of your will:Many times, the nominee of the mutual fund differs from the beneficiary on the will. This usually happens when investors appoint a nominee when they first invest in the mutual fund and forget about it with time. Since a will is usually drafted later in life, the two names may not be the same. This can later lead to confusion and disappointments among your beneficiaries. Hence, we would recommend keeping the beneficiary of your will the same as the nominee of your mutual fund. This is also because a will is upheld over a nomination in most legal cases.
• Only nominate someone you trust:Mutual funds permit you to add family members, friends, acquaintances, and even minors as the nominee. It is important to select your nominee with utmost care. Try to make a rational decision and select someone that you trust. In the case of a minor nominee, you will also have to appoint a guardian. This should be someone you and your appointed nominee can rely on.
• Enter their correct details:Be careful while filling the nomination form and enter accurate information, such as the name, date of birth, percentage of share, etc. Cross-check the information before submitting the form. In case of any errors, reach out to your AMC and get the information rectified.
• Update the nominee at every major life event:It is extremely necessary to update the nominee as per your existing relationships and financial obligations. For example, if you get divorced or remarried and no longer want to keep your ex-spouse as the nominee, make sure to remove them and add the new spouse as soon as possible. If you forget to do this, your current spouse might lose their right to claim the units in your absence.

What Happens If You Do Not Have A Nominee?

It is important to appoint a nominee to ensure that your investments are passed on to the right person. However, as life gets busy, many of us forget to nominate a person. Sometimes, we may procrastinate updating the nominee. Other times, the appointed nominee may pass away unexpectedly and you might wonderhow to claim Mutual Fund units after the death of the investor. In such circ*mstances, your legal heir can claim your assets. However, the AMC will transfer the units after reviewing the following documents:

• Death certificate of the deceased – either original or notarized
• KYC documents of the legal heir claiming the assets
• Canceled cheque with the bank account number and the account holder’s name attested by the bank branch manager. You can also submit bank account statements attested by the bank branch manager
• A Foreign Account Tax Compliance Act (FATCA) self-certification document
• An indemnity bond signed by all the legal heirs of the deceased
• A notarized will or a succession certificate issued by the court
• The legal heir can submit all these documents and a letter for transmission of units and send them to the concerned AMC.

If you do not have a legal heir or any other person mentioned in the will, a relative may claim the assets. In such a case, the claimant has to fill and submit form T3, also known as the Transmission Request Form. The claimant also needs to submit a set of documents depending on the amount to be claimed. You can check the same with the fund house.

Mutual fund nominationjust like awill documentis an essential part of estate and succession planning. Hence, it should not be ignored. If you have invested in mutual funds or plan to do so in the future, make sure to add nominees.