How to Claim Mutual Fund Investments After Death of Investor

Individuals invest in various financial instruments to achieve certain financial goals and to support their loved ones. However, unforeseen circumstances, such as the death of the investor, may strike at any time, upsetting these plans. As an investor, it is important to know what happens to your mutual fund investments after your death and how your loved ones can reap the benefits of your investment decisions.

Read this blog to understand the different scenarios and steps that need to be taken to transfer mutual fund account balances in the case of the death of the investor.

There are several ways in which eligible claimants can receive the benefits of mutual fund investments by getting the amounts transferred to their accounts.

Who Can Claim Mutual Fund Investments?

Upon the death of the investor, three main types of eligible individuals can claim the mutual fund units. Although the process of transferring investments is mostly similar, there are a few differences depending on the claimant.

• Joint Account Holder
• Nominee
• Legal Heir

Joint Account Holder Claims

Where one of the account holders in a joint account is deceased, the mutual fund units are transferred to the surviving account holder.

However, if both account holders of a joint account are deceased, the mutual fund units can be claimed by the nominee. In case a nominee has not been appointed, the investment can be claimed by the legal heirs.

Sole Account Claims

If the investor had a sole account, the investments on the death of the investor will be transferred to the nominee. If the investor has not appointed a nominee, the mutual fund units can be claimed by the legal heirs.

If the investor has multiple nominees or legal heirs, the mutual fund investments will be divided between the claimants. The percentage share of the investments will be mentioned in the nomination document.

The investments will be divided as per the probated will in the case of multiple legal heirs submitting a joint claim to the investments. In the absence of a valid will, all legal heirs can claim an equal share of the investments.

Required Documents for Joint Holder or Nominees

For a joint account holder or a nominee to claim the investments of a deceased investor, certain documents are required. These include: 

• A letter from the claimant regarding the transmission of mutual fund units or a transmission request form.
• Notarised copy of the deceased investor’s death certificate.
• Aadhar Card, PAN Card, or valid KYC documents of the claimant.
• If the nominee is a minor, the KYC documents of the guardian along with the birth certificate of the nominee.
• Cancelled cheque, attested bank statements, and other bank details of the claimant.

Required Documents for Legal Heirs

A legal heir can claim the investments if both the joint holders of an account are deceased and the nominee is not present. In the case of a solo account holder, the legal heir can claim the units if a nominee has not been registered. In addition to the documents required for a joint holder or nominee, a legal heir needs to submit additional documents to get the mutual fund's units transferred.

• Indemnity Bond signed by all legal heirs.
• Individual Affidavit by each legal heir.
• Notarised copy of the probated will or a notarised copy of the succession certificate.

Process to Claim Mutual Funds After Death of Investor

Given below is the step-by-step process to claim mutual funds after the the death of investor:

• Contacting Fund Houses

The first step that a joint account holder, nominee, or legal heir has to do is to contact the fund house where the deceased investor held his/her investments. Since investments could be spread across several folios, it is necessary to contact the respective fund house for the same.

• Document Submission

After contacting the fund house, the claimant must send a formal request for the transmission of the mutual fund units. The claimant must submit all the required documents and should adhere to the guidelines of the fund house to complete the transmission process on time.

• Division Process for Multiple Claimants

In the case of multiple legal heirs or nominees, the mutual fund investment will be divided as per the instructions listed in the will of the deceased investor. In the absence of a valid will, the mutual fund units will be divided equally among the eligible claimants.

• Tax Implications

A claimant must know the tax implications of the transfer of mutual fund investments. The transmission of mutual fund units from the deceased investor to the claimant does not attract any capital gains tax. However, any gains following the sale of these units or through receipt of dividends will be subject to taxation.

Conclusion

Investing is one of the best ways in which individuals can generate wealth and provide financial security for their loved ones. However, it is also crucial for the investors and their close ones to know how they can make the most out of the investments following the death of the investor. Investors should remember to register nominees, maintain investment records, and have legal documentation in place.