Using the nomination option in mutual funds is very simple and beneficial
Mutual fund investors should opt for the nomination facility to avoid hassles in case of unforseen events. Though nomination is not essential under the MF rules, it helps avoid inconveniences and hassles in future. With the nomination, fewer documents are required to transmit the investments in the Mutual Fund, should the unfortunate need ever arise. Sometimes, you can nominate up to three persons and indicate their differential shares to the funds.
To nominate, the account holder(s) must fill up and sign the nomination form along with the signatures and photographs of the nominee and signatures of two witnesses. If the nominee is a minor, then the signature and the photograph of guardian will also be required. This form can be submitted to AMC at the time of initial investment or anytime after the investment is made. The nomination can be changed by the account holder/s anytime, by filling up a new nomination form and submitting the same to the fund house.
Legally, the immediate family will be entitled to inherit the money in case of the unfortunate death of the investor, though this entails a lot of legal procedures. Nomination helps surviving family members inherit the wealth more easily. The nominee can be any person - related or unrelated. However, only an individual can be a nominee. A nominee should not be a society, trust, body corporate, partnership firm, karta of Hindu Undivided Family (HUF) or a power of attorney holder.
Further, only individuals holding beneficiary accounts either singly or jointly can make a nomination. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate. Nomination for joint holders is permitted, however in the event of death of one of the holders, the mutual fund units will be transmitted to the surviving holder's name. In the case of death of all holders, the units will be transmitted to the nominee.
An NRI can nominate directly, but the power of attorney holder cannot nominate on behalf of the NRI. An NRI can be a nominee, subject to the exchange control regulations in force. A minor cannot nominate though a minor can be a nominee, through his guardian. In such a case, the guardian will sign on behalf of the nominee and in addition to the name and photograph of the nominee, the name, address and the photograph of the guardian must be submitted to the Fund house.
To claim the funds, the nominee has to produce Identity proof such as ration card, passport, election card, or PAN to the company along with the other requisite documents.
A small procedural formality can go a long way in making life easy for survivors.
