What happens to mutual fund investments after the death of an investor?

It is one of the frequently asked questions: how can a nominee or legal heir claim the investment proceeds after the death of a mutual fund investor? Well, as per the law, a joint-holder, nominee or legal heir can claim the proceeds. The process is called transmission.

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.

Basic Process

The nominee or legal heir should submit the required documents along with the letter requesting transmission of units to the AMC. It is necessary to contact every mutual fund house separately where the dead person had investments. However, a single letter would be sufficient if all folios belong to a particular AMC and they are held in a same mode of holding.

The mode of holding would decide the documents to be submitted along with the request. There can be three situations:

Case 1 . Transmission to surviving joint holders

Case 2 . Demise of sole or all holders, where nominee is registered

Case 3 . Demise of sole or all holders, where nominee is NOT registered

In all the cases, surviving holders or nominees or legal heirs should submit the following common documents with the AMC.

Letter requesting for transmission of units. It should be in the AMC's specified format.

Original or duly notarised or attested photocopy of death certificate of the deceased unit holder

KYC confirmation of nominee or claimants or surviving unit holders

New bank mandate in AMCs specified format with attestation from bank branch manager or a cancelled cheque with account number and holder's name printed on the cheque or bank account statement. The bank mandate has to be given on bank's letter head or, if on a plain paper, bank branch seal, employee name and number seal should be affixed on it.

FATCA self-certification

No nominee situation is a mess

While case 1 and 2 will require the documents stated above, case 3 where nominee is not registered needs two additional legal documents. Indemnity bond signed by all legal heirs confirming the claimant and individual affidavit by legal heirs. However, if the claim amount is above a certain hurdle limit, 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.

Take care of nitty-gritties

The problem arises if claimant's name in the identity documents or bank record and AMC's record do not match. For instance, the identity documents carries middle name and AMC's record do not or vice-versa, or different spellings.

So, while mentioning nominee, make sure the details match the nominee's identity records.

Also, if the 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.

Finally, all these things are possible only if the investor keeps someone informed about his investments. If no one is aware of the investments, the investment will keep lying as unclaimed. So, make sure that you keep the nominee or someone in the loop about your mutual fund investments. ....