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Why Appoint Nominee For Mutual Funds? Research Team | Posted On Wednesday, December 06,2017, 07:04 PM

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Why Appoint Nominee For Mutual Funds?



Why do you earn money and accumulate wealth? Is it not to pass it on to your children? If you want your wealth to reach your children and not someone else, better study estate planning. One of the most important aspects of estate planning is nomination. So what is nomination?

Nomination is a process where you appoint a person called nominee, who serves as a trustee and makes sure your wealth reaches heirs (children). The nominee is not the owner of your assets. He just transfers your assets to his name and then transfers these assets to legal heirs (your children).

A nominee can be a family member, a friend, relative or someone you trust. Want to know more on estate planning? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.

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Why Appoint Nominee For Mutual Funds?

You must appoint a nominee for mutual fund schemes you hold. If you have mutual funds in your demat account, you appoint a nominee for the demat account. Nomination is compulsory for new folio accounts you have opened, especially if you are a single holder.  

1. How to make a nomination for a mutual fund?

If you look at the mutual fund scheme form, there is a column asking for the details of the nominee. You fill in the column and specify or change the nomination on the mutual fund folio. You have the option of filling up to 3 nominees for your mutual fund portfolio. If you choose multiple nominees, you can also specify what percentage of the investment goes to which nominee.

Let's say you have 3 nominees: Spouse, son and daughter. You now specify who gets how much.

Nominee 1 (Spouse)            -  50% of the investment.

Nominee 2 (Son)                  -  25%  of the investment.

Nominee 3 (Daughter)         -  25%  of the investment.

If you do not specify the percentage, then each nominee gets an equal share. You do not require any additional documents along with the nomination form. The nominee must sign the form. If the nominee is a minor, the guardian will sign the form. The name and address of the nominees must be filled.

It is smart to get the PAN of the nominees and have them registered according to KYC (Know-your-customer). This would help with faster and smoother transfer of mutual fund units.

SEE ALSO:What is nomination? Why is it necessary?

2. Why make a nomination for a mutual fund?

If a nomination is registered, it means easy transfer of funds (money) to the nominee, in the event of the demise of the mutual fund investor. If a nominee is not appointed, your heirs will have to show a lot of documents to claim the mutual fund investment.

They might have to produce a WILL or a No Objection Certificate (NOC) from other heirs to get mutual fund units transferred to their name.

To ensure a hassle free transfer of mutual fund units to your heirs, make a nomination.

3. How is  death claim settled in mutual fund investments?

Let's say you hold mutual fund units singly with nomination. On death of the single holder, your nominee can either redeem the units or have them transferred in his name. Your nominee will have to make a request through a letter in a format specified by the fund house. The request must be submitted along with the requisite documents.

  • Death certificate of the deceased unit holder of the mutual fund, either original or photocopy which has been attested by the gazetted officer.
  • The nominees bank account details which are attested by a bank manager, along with a cancelled cheque, bearing his name.
  • KYC showing PAN and the name of the nominee.

See also: Money market mutual fund

If you invest in mutual funds, may sure to appoint a nominee. This will save your heirs a lot of trouble. The nominee will make sure, your heirs get the money. Be Wise, Get Rich.

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