How to Claim Mutual Fund Investments After Death of the Investor

Losing a loved one is an emotionally challenging experience and dealing with financial matters during this time can be overwhelming. One of the critical financial concerns is managing the deceased's investments, including Mutual Funds. In this blog, let’s understand the process of claiming Mutual Fund investments after the investor's death, ensuring that these assets are transferred to their rightful claimants.

Understanding the basics

Who can claim?

After an investor's demise, the individuals who are eligible to claim the Mutual Fund investments are:

Joint account holders: The surviving joint holder(s) can claim the funds. This process is typically straightforward as the funds get transferred to the survivors.

Nominees: A nominee is a person designated by the investor to receive the investments upon his/her death. Nominees have a clear, predefined right to claim the investments, making the transfer process simple.

Legal heirs: In cases where no nominee is designated, the legal heirs of the deceased can claim the investments. Legal heirs are usually determined through a will or in its absence, through legal succession laws. The process for legal heirs may involve more documentation and legal formalities. 

Different scenarios of claims

For joint accounts

Survivorship: Upon the death of one holder, the investments get transferred to the surviving joint holder(s).

All holders deceased - nominee present: If all the joint holders are deceased, the nominee can claim the investments.

All holders deceased - no nominee: If there are no nominees, the legal heirs are entitled to claim the investments. 

For sole accounts

The nominee is registered: The nominee can claim the investments.

No nominee is registered: The legal heirs are entitled to the investments. 

The claim process

Documents required

The claim process involves submitting certain documents to the Mutual Fund house based on whether the claimant is a joint holder, nominee or legal heir.

For joint holders or nominees

Transmission Request Form: A letter or form requesting the transmission of units

Death Certificate: A notarised copy of the death certificate of the deceased investor

KYC documents: Aadhaar Card, PAN Card etc. of the claimant
Bank account details: Cancelled cheque or bank statement of the claimant 

For legal heirs

In addition to the above documents, legal heirs must provide:

Indemnity Bond: Signed by all the legal heirs

Affidavit: Individual affidavits by each heir

Probated Will or Succession Certificate: If available

Process details

The process of claiming Mutual Fund investments after the death of an investor is a crucial step to ensure that the assets are rightfully transferred to their intended beneficiaries. This procedure involves specific steps that need to be followed. Understanding these steps can significantly ease the process for the claimants, whether they are joint account holders, nominees or legal heirs.

1. Contacting Mutual Fund houses

Individual approach: Claimants must contact each Mutual Fund house where the deceased had investments.

Folio specific: This is necessary because investments might be spread across different fund houses and each has its own set of procedures and requirements.

2. Submission of documents

Transmission request: Along with a formal request for transmission, various documents such as death certificates, KYC details and bank account information of the claimant are required.

Ensuring compliance: The documents must comply with the guidelines of the fund house to avoid any delays or complications.

3. Division among multiple claimants

Clear division guidelines: With multiple nominees or heirs, the Mutual Fund units are divided as per the instructions in the deceased’s will.

Equal distribution: In the absence of a will, the units are generally divided equally among all eligible claimants, adhering to succession laws.

Tax implications

No Capital Gains Tax on transmission: Transferring Mutual Fund units to a claimant does not incur Capital Gains Tax.

Tax on subsequent transactions: Any financial gains from these units post transfer such as gains through redemptions or dividends are subject to the prevailing tax laws.

Seek tax guidance: Claimants can consult a tax advisor to understand the tax implications of any future transactions with these Mutual Fund investments.

Timeline for the process

Additional tips for investorss

1. Nomination is crucial:

Simplify the transfer process: Nominating a beneficiary for the Mutual Fund investments is a proactive step to ensure a smooth transfer of assets upon the demise of an investor.

Prevents legal hassles: It helps in avoiding legal complications that your heirs might face in claiming the investments.

Ensure nominee details are updated: Regularly updating the nominee details is essential, especially after major life events like marriage, the birth of a child or a death in the family. 

2. Record keeping:

Organised documentation: Keeping a detailed record of all your investments, including Mutual Fund statements, account numbers and related financial documents is important.

Ease for heirs: This organised approach will help the heirs or executors in identifying and managing the assets efficiently after the demise of an investor.

Safe and accessible storage: Store these records in a secure yet accessible place and ensure that at least one trusted family member or advisor knows where to find them.

3. Legal documentation - The role of a will:

Clear distribution of assets: A legally binding will is instrumental in specifying how you wish your assets including Mutual Fund investments to be distributed.

Avoids disputes among heirs: It helps minimise disputes among heirs, ensuring that your assets are allocated as per your wish.

Regular updates: It is advisable to review and update your will periodically, especially after significant changes in your financial situation or family dynamics.

Conclusion

The process of claiming Mutual Fund investments after the death of an investor is straightforward, provided you have the right information and documents. It is crucial to keep your investment details updated and ensure that your loved ones are aware of these investments. By planning ahead and maintaining clear records, you can ensure that your investments are seamlessly transferred to your loved ones, securing their financial future even in your absence.