Mutual Fund Investments – Transmission process &procedures involved

What is a Mutual Fund?

When a group of people or many prospective investors with common investment objectives join hands and pool in funds (collect money) with the objective of investing ; the money so collected/ accumulated in aggregate can be termed to be a Mutual Fund.

Thus the entity which collects the money from prospective like minded investors is a Trust and is managed by a professional team and the decisions on where, how , what to invest is taken by the Fund Manager. The Fund Manager and his/ her team thus decide to invest in specific companies or products/ instruments depenidng upon the nature of the Fund viz mandated to invest in – equities, bonds, money market instruments and/or other securities.

Each investor owns units, representing a portion of the holdings of the fund.

How does an investor invest in a Mutual Fund?

For buying/ subscribing to units of Mutual Fund the investor needs to fill up the respective form , attach all KYC documents. Units of mutual funds can be held either singly or jointly (a maximum of three applicants) on either or survivor or joint basis (mode of investment) .The units can also be held/ invested as Karta of HUF. Nomination facility is available.

Mutual Funds can be held in physical form or through a Depository. Kindly note that in case of demise the Investor should inform the concerned Mutual Fund individually about the demise of the holder and also the depository.

Nomination in case of a Mutual Fund?

Nominee is just a trustee, hand has to hand over the proceeds of the Mutual Fund on liquidation to the legal heirs of the Mutual Fund holder(s).

An applicant irrespective of holding structure (single, joint, Karta HUF etc.) can register nomination while applying for (purchasing ) the units. If the nominee is a minor, then the nomination needs a guardian who needs to be named and registred with the Mutual Fund. Multiple nominations are also possible in a folio. An investor can mention upto three nominations per folio with specific percentage of the units sahred (identifiable ownership) against each nominee. A nomination can be registered (newly) or changed at any time and / or even cancelled for which standard forms need to be submitted to the Mutual Funds.

Can a joint holder be added to the existing Mutual Fund investment which is currenlty singly held ?

No , not possible. Changes in holding are not allowed by funds; addition in case of single holders & deletion of a living joint holder.

However, on demise a joint holder, name of the deceased would be deleted and then the holding becomes single holder. However the requisite forms need to be filled in.

Is it possible to change the mode of holding from ‘joint’ to ‘either or survivor’?

Yes, this being an adminstrative action by the holders amongst themselves , the same can be modified/ changed with the consent of all holders. In case of units owned by joint holders, the administrative aspects of changing from ‘joint’ to ‘either or survivor’ or vice versa is possible. However the requisite forms need to be filled in.

In the event of the demise/ death of a Unit holder, the nominee or legal heir, shall be able to redeem the investment any time due to the deceased unit holder subject to production of requisite documentary evidence to the satisfaction of the Asset Management Company

However, in case of Equity Linked Saving Schemes (ELSS) , in the event of the death of the Unit holder, the nominee or legal heir, (subject to production of requisite documentary evidence to the satisfaction of the Asset Management Company) as the case may be, shall be able to redeem the investment only after the completion of one year (though there is lock in of 3 years) , or any time thereafter, from the date of allotment of units to the deceased unit holder. The Trustee reserves the right to change the lock‐in period prospectively from time to time, in the event of amendment(s) in the ELSS guidelines with respect to the lock‐in period.

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 of transmission

The nominee or legal heir needs to submit the required documents (to the satisfaction of the Asset Management Company) along with the letter requesting transmission of units to the customer service centre of the AMC either by hand delivery or by post. If deceased had investments in many mutual fund schemes then each Mutual funds needs to be seperately contacted.

When the single holder has died and there is a Nomination registered

The bereaved family or the heirs or the Nominee needs to submit to the mutual fund house the following documents :

• Letter from nominee(s) to the AMC/ Mutual Fund requesting for transmission of units in his/ their favour
• Submit the application (if in specified format) with notarized copy of the death certificate
• Proof of identity of the nominee (passport, ration card, driving license, etc) Bank Account Details of the new first unit holder as per specified format and also a canceleld cheque
• KYC of the nominees and declaration under Foreign Account Tax Compliance Act (FATCA) regulations. KYC basically asks to verify the identity of the person and the address proof along with a photograph while FATCA requires some basic information whether the person holds any financial assets or income in any foreign country or not
• Declaration and indemnity against any other claims. Each AMC has its own Indemnity format, banks require it on a stamp paper. Value fo Stamp Paper normally is a function of State in which Nominee resides.
• Also attach a copy of the recent statement of account issued by the Asset Management Company(AMC)

When the single holder has died and there is no Nomination registered

The bereaved family or the heirs or the Nominee need to submit relevant documents to the mutual fund house depending whether the deceased person has a WILL or died intestate (without a WILL).

• Letter from claimant(s) to the AMC/ Mutual Fund requesting for transmission of units
• Death Certificate(s) in original or photocopy duly notarized
• Bank Account Details of the claimant (proposed new first unit holder) as per specified format
• Detailed KYC of the claimant(s) – proof of identity (passport, ration card, driving license, etc)
• Indemnity against any other claims
• Copy of the recent statement of account issued by the Asset Management Company(AMC)
• If there is a WILL which mentions even remotely about this class or type of investment then copy of the same , if large amount is involved AMC may ask for Probated copy

However, the legal documents required depend on quantum of the investment to be transmitted / transferred, called as Threshold Limit.

Every Fund has internal guidelines of the Threshold Limit and varies.

(Source: Websites of respective AMCs and public information)

If the aggregate value of the MF units which are intended to be transmitted, is below the Threshold Limit, any appropriate document evidencing relationship of the claimant(s) with the deceased unit holder(s).

If the transmission amount is equal to or more than the Threshold Limit following documents will be required:

• Notarized copy of Probated WILL, or
• Legal Heir Certificate or Succession Certificate or Claimant’s Certificate issued by a competent court, or
• Letter of Administration, in case of Intestate Succession
• If there is more than one claimant then any one of them claiming, has to obtain the No objection Certificate (NOC)/Deed of Relinquishment from other legatees and produce the Probate of the WILL/Letter of administration.
• If the claimant is a Minor: An attested copy of the proof of date of birth and Proof of identity of the natural guardian
• In case of death of ALL holders (in joint or anyone or Survivor ship mode), procedure would be same as under SINGLE holding.

When the First Holder of the units has died

In case of the demise of the first holder, the units will be transferred to the surviving unit holder(s) and the surviving unit holders need to submit the following documents:

• Letter from the surviving unit holder(s) intimating the death of the first holder
• Death Certificate in original or photocopy duly notarized
• Address, bank details, PAN of new first holder
• Know Your Customer (KYC) of the surviving unit holder(s), if not already available

When one of the Holder (among the Joint Holder) of the units has died

In the case of demise of one of the joint holders (other than the first), the units will continue to remain in the name of the first unit holder. The first unit holder has the option to register any other person as a joint holder, for which the following documents are required to be submitted:

• Letter from the surviving unit holder(s) intimating the death of the joint holder
• Copy of the death certificate of the joint holder duly notorised

When in an HUF , Karta has died

As HUF is perpetual, unles sotherwise dissolved , although the affairs of HUF are managed by the Karta, it does not come to an end in the event of his death. The members of the HUF can appoint a new Karta who needs to submit the following documents for transmission of units:

• Letter requesting for change of Karta in a standard format duly signed by the new Karta
• Death certificate in original and notarized copy for submission
• Duly certified bank certificate stating that the signature and details of new karta have been appended in the bank account of the HUF
• KYC of the new karta and updated KYC of HUF, if not already available
• Proof of identification of the new karta
• Indemnity bond signed by all the surviving coparceners and new Karta. Indemnity bond on stamp paper / franked of value as applicable in the respective State of execution of the indemnity bond

In case there is no surviving coparceners or if the transmission amount is more the threshold limit or where there is an objection from any surviving members of the HUF, the transmission can be effected only on the basis of a Notarized copy of Settlement Deed or Notarized copy of Deed of Partition or Notarized copy of Decree of the relevant competent Court.

(Source: AMFI website and public information)

In case the claimant produces any one of the documents mentioned at point no.2 above (under Additional Legal Documents), where transmission value is Rs.2 lacs or more, then indemnity bond is mentioned at point no.1A would not be required.