How to Claim Mutual Fund Units After Death of the Unit-holder
Moneylife Digital Team 08 May 2021
We save and invest in the hope of providing a better life for ourselves and our loved ones. But death is inevitable. So what happens to our mutual fund (MF) units when we die?
 
Transmission of MF units is a process whereby units held in the name of deceased unit-holder are transferred either to the surviving unit-holders or to the nominee or to the legal heirs. 
 
MF Asset Management Companies (AMC) have a common procedure for transmission of units, however, there might be a slight variation in formats or documents required across AMCs, but broadly the process is the same.
 
MF units can be held either singly or jointly (up to three joint holders), and the mode of operation could be on ‘either or survivor’ or on a joint basis.
 
The mode of holding would decide the documents to be submitted along with the request. There can be three situations:
 
1. Transmission to surviving joint holders
2. Demise of sole or all holders, where nominee is registered
3. Demise of sole or all holders, where nominee is NOT registered
 
If the investment is held jointly, then it passes on to the second holder on death of the first holder. If there is a nomination but no joint holder, it passes on to the nominee. The MF units need to be in the name of a single investor for the units to be transferred to the registered nominee. The nominee may choose to hold on to the investment or redeem it, but will first need to get the units transmitted.
 
The nominee or joint holder needs to make an application for transmission to the MF that issued the units  along with some documents. 
 
There are standard formats for the applications, affidavits and other submissions which are easily available on the websites of MF companies. Some MF houses may ask for some extra documents. On submitting these documents to the AMC, the units can be transferred to the nominee within 30 days.
 
If the legal heirs of the deceased unit-holder dispute the transfer to the nominee, the investments will be held in trust by the nominee till the dispute is resolved. According to the Securities and Exchange Board of  India (Mutual Funds) Regulations, 1996, on the demise of the MF holder, the nominee will get the MF investment. However, the nominee is not the owner of the assets and can only merely hold it ‘in trust’ until the legal heir claims it.
 
The legal heir is free to claim the MF folios against the nominee. A comprehensive, clear, unambiguous Will by the MF investor can help handle any potential conflicts which might arise later on.
 
It is also possible to have multiple nominees for a fund. In such a case, each nominee will be assigned the portioned number of fund units according to the intent of the original deceased investor.
 
If there are no joint holders or nominees, the investments are transferred to the legal heirs of the deceased when their application for transmission is supported by prescribed legal documents. This is a messy situation and requires more documents -Indemnity bond signed by all legal heirs confirming the claimant and individual affidavit by legal heirs. However, if the claim amount is above Rs 2 lakhs, the claimant will be required to produce a notarised copy or probated will or succession certificate by a competent court or letter of administration, which makes the process harder.
 
The documents required generally in all cases, include a copy of the death certificate duly attested by a notary public or gazette officer. The claimant needs to attach a self-attested copy of their PAN card, bank details attested by the bank manager or cancelled cheque with his/her name as the account holder, and account number and documents establishing that he/she has completed KYC formalities. One also needs to submit Foreign Account Tax Compliance Act (FATCA) & Common Reporting Standard (CRS) self-certification.
 
In case of demat holdings, the client depository participant (DP) ID of the deceased person and the claimant’s DP ID will also be required.
 
If the transmission amount is for more than Rs2 lakh, as an operational risk mitigation measure, the signature of the nominee/ claimant shall be attested only by a notary or a Judicial Magistrate First Class (JMFC) in lieu of banker’s attestation. 
 
The process and documentation for transmission of units where the claimant / nominee is a mentally unsound person, is the same as applicable to a minor claimant, except that the guardian shall be a court appointed guardian. Additionally, a medical certificate from an appropriate registered medical practitioner may be obtained regarding the mentally unsound person.
 
Copies of all supporting documents submitted for settlement of the claim, such as the death certificate of the deceased, birth certificate of the minor, Probate of Will, succession certificate, letter of administration shall be duly attested by a notary  or a gazette officer.
 
Problems do arise when the claimant’s name in the identity documents or bank record and AMC’s record do not match e.g. the identity documents carries middle name and AMC’s record do not or vice-versa, or different spellings. Hence, while adding the nominee, make sure the details match the nominee’s identity records.
 
In case the nominee/ claimant is a minor, all stated documents of the guardian will be required. If all required documents are in place, the whole process will take up to 15 days after submission of request letter and relevant documents.
 
Documents required for transmission:
 
In case of transmission of units, document requirements vary as per situations, such as holding pattern (sole or joint holding), survivorship clauses and  whether there is a valid nomination registered and the current value of investments.
 
1. Transmission to surviving unit holders (Joint holding):
 
a) Letter from surviving unit-holders to the AMC/RTA requesting for transmission of units
 
b) Death certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager
 
c) Bank account details of the new first unit holder along with attestation by a bank branch manager or cancelled cheque/bank account statement/passbook bearing the account details and account holders name
 
d) Know your customer (KYC) of the surviving unit-holders, if not already provided.
 
E)  FATCA & CRS 
 
2. Transmission to registered nominee in case of death of sole or all unitholders:
 
a) Letter from claimant nominees to the AMC/RTA requesting for transmission of units
 
b) Death Certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager
 
c) Bank Account Details of the new first unit holder along with attestation by   a bank branch manager or cancelled cheque/bank account statement/passbook bearing the account details and account holders name
 
d) KYC of the claimant
 
e) FATCA & CRS 
 
3. Transmission to claimant, where the nominee is not registered:
 
a) Letter from the claimant to the AMC/RTA requesting for transmission of units
 
b) Death certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager
 
c) Bank Account Details of the new first unit holder along with attestation by a bank branch manager or cancelled cheque/bank account statement/passbook bearing the account details and account holders name
 
d) KYC of the claimant
 
e) Indemnity Bond from legal heir
 
f) Individual affidavits from legal heir
 
g) If the transmission amount is less than Rs 2 lakhs, any appropriate document evidencing relationship of the claimant with the deceased unitholder.
 
h) If the transmission amount is Rs 2 lakhs or more: Any one of the documents mentioned below:
 
a. Notarised copy of Probated Will, or
 
b.Legal Heir Certificate or Succession Certificate or Claimant’s Certificate issued by a competent court, or
 
c.Letter of Administration, in case of Intestate Succession.
 
FATCA & CRS details
 
4. Transmission in case of HUF, due to death of Karta: 
 
HUF, being a Hindu Undivided Family, the property of the family is managed by the Karta and HUF does not come to an end in the event of the death of the Karta. In such a case, the members of the HUF will appoint the new Karta who needs to submit the following documents for transmission:
 
a) Letter Requesting for change of Karta,
 
b) Death Certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager
 
c) Duly certified Bank certificate stating that the signature and details of new Karta have been appended in the bank account of the HUF
 
d) KYC of the new Karta and KYC of HUF, if not already available
 
e) Indemnity bond signed by all the surviving coparceners and new Karta
 
In case of no surviving co-parceners OR the transmission amount is Rs 2 lakhs or more, or where there is an objection from any surviving members of the HUF, transmission should be effected only on the basis of any of the following mandatory documents:
 
a. Notarized copy of settlement deed, or
 
b. Notarized copy of deed of partition, or
 
c. Notarized copy of decree of the relevant competent Court
 
FATCA & CRS details
 
Other details:
 
PAN card copy or any other proof of identity of the claimant is not required separately, if the claimant has already complied with the KYC procedure. Where the units are to be transmitted to a claimant who is a minor, various documents like KYC, PAN, bank details, indemnity should be of the guardian of the nominee.
 
Additional legal documents:
 
Indemnity Bonds/individual affidavit to be on minimum Rs 20 stamp paper or more and duly notarized. KYC address should match with the address mentioned in the Indemnity Bond.
 
In June 2020, the Association of Mutual Funds in India (AMFI) updated the guidelines on transmission of MF units. The guidelines ensure standardisation of documents needed for transmission of units among AMCs and to avoid any confusion or inconvenience to the claimants of the deceased MF unitholders in the transmission process due to varying practices/documentation amongst different AMCs. The table given below shows the transmission documents required as per every given situation. 
 
 
The table given below shows the type of supporting documents required as per every given situation.
 
 
In case of transfer of MF holdings after someone's death, the nominees do not have to pay any tax. Tax liability would only arise at the time of redemption of units. When it comes to exit load, the original date of purchase will still be applicable, not the date of transmission.
 
It is important to keep the nominee/ legal heirs in the loop about the investments. If you have not named a nominee or made a Will, please do so. Take the time to leave behind a legacy that takes care of your loved ones, emotionally and financially.
 
Comments
akartik80
3 months ago
Thanks for the detailed article! Can you please help resolve one doubt:
Is nominee's physical presence required at the time of submitting a transmission request or just couriering all the required documents / sending via someone else would do the job?
jskhattar
7 months ago
I am curious to know what provision of law permits transmission of the MF units (where there is no nominee) to a claimant evidencing relationship with the deceased, just on the basis of 'appropriate' document when the value is less than Rs. 2 Lakhs. Wouldn't this be substantially against the provisions of succession laws?
Kalpesh P Shah
7 months ago
One thing to note is that it is good to have a fixed joint holders with nominee and all your mutual fund investments done in same holding pattern with same email id + phone numbers.

It is immensely helpful to have things done online. One can redeem the funds completely online without having to go though these hassles as long as email address + phone number is registered for one of the holders.

If you can answer me one thing, it will be helpful

Mr A (unmarried) holds some mf investment and has mother as nominee.

In worst case scenario, who can claim mf investments in case of death of both A and the nominee? I am assuming worst case considering we are seeing once in a life event of covid19

Thank you!
jskhattar
Replied to Kalpesh P Shah comment 5 months ago
I assume A is a Hindu for the purposes of this discussions, based on succession law. It will depend on who dies first. If A dies first, the mother who is a nominee will be entitled to the benefits. However if the mother dies first, the nomination will automatically lapse and it will be as if there is no nomination. In such a case, if there is no nomination, the beneficiaries of A under the Hindu Succession Act, which would apply for intestate (where there is no Will) succession, would get the benefits.
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