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All you need to know about mutual fund units transmission after the investor’s death

We all invest towards our financial goals, such as building a fund for a child’s higher education, our own retirement, etc. We hope to achieve these financial goals with our investments during our lifetime. However, life is uncertain. What if we meet an untimely death? What happens to our investments in such a scenario? This […]
Transferring-mutual-fund-units-after-death

We all invest towards our financial goals, such as building a fund for a child's higher education, our own retirement, etc. We hope to achieve these financial goals with our investments during our lifetime. However, life is uncertain. What if we meet an untimely death? What happens to our investments in such a scenario? This is where succession planning comes into the picture. In this article, we will understand the process of transferring mutual fund investments to the beneficiaries in the event of an investor's death.

What is mutual fund transmission?

Transmission is the process of transferring the mutual fund units to a beneficiary/beneficiaries in the event of a unitholder’s death. The various transmission scenarios can include:

  1. In the case of joint holding, wherein the second and/or third holder dies, the name/s of the deceased unit holder/s will be deleted.
  2. In the case of joint holding, wherein the first holder dies, the transmission of units will be to the surviving unit holder/s.
  3. In the case of death of the sole holder or death of all joint holders, the beneficiary will be the nominee/s (if any).
  4. In the case of death of the sole holder or death of all joint holders, the beneficiary will be the legal heir/s (if there is no nominee).

Depending on any of the above scenarios, the beneficiary will have to submit the appropriate documents to the AMC for the transmission process. Let us discuss each of the above scenarios.

1. Joint holding wherein the second and/or third holder dies

In this case, the surviving unit holder(s) will have to submit the Request Form (Form T1) requesting the AMC to delete the name of the deceased second and/or third holder’s name(s). Along with Form T1, the following documents will have to be submitted:

  1. Death certificate of the deceased unit holder(s) in original copy or photocopy duly attested by a Notary Public or Gazetted Officer.
  2. Fresh Bank Mandate Form along with a cancelled cheque of the new bank account (only if there is a change in existing bank mandate).
  3. Fresh Nomination Form in case there is no nomination or a change in existing nomination is desired by the surviving unit holders.
  4. KYC acknowledgement OR KYC form of the surviving unit holder(s), if not KYC compliant.

2. Joint holding wherein the first holder dies

In this case, the surviving unit holder(s) will have to submit the Transmission Request Form (Form T2) requesting the AMC for the transmission of units to the surviving unitholder(s). Along with Form T2, the following documents will have to be submitted:

  1. Death certificate of the deceased unit holder in original copy or photocopy duly attested by a Notary Public or Gazetted Officer.
  2. Copy of PAN Card of the Surviving Joint Holder(s) (if PAN is not provided already).
  3. Cancelled cheque of the new first unit holder, with the claimant’s name pre-printed or recent bank statement/passbook (not more than three months old) of the new first holder.
  4. KYC Acknowledgement OR KYC Form of the surviving unit holder(s), if not KYC compliant.

3. Death of sole holder or all joint holders where there is a nominee

In this case, the nominee(s) will have to submit the Transmission Request Form (Form T3), requesting the AMC for the transmission of units in favour of the nominee(s). Along with Form T3, the following documents will have to be submitted:

  1. Death certificate of the deceased unitholder(s) in original or photocopy duly attested by a Notary Public or a Gazetted Officer.
  2. Copy of Birth Certificate, in case the nominee is a minor.
  3. Copy of PAN Card of the nominee(s) / guardian (in case the nominee is a minor)
  4. KYC acknowledgement or KYC form of the nominee(s) / guardian (where the nominee is a minor)
  5. Cancelled cheque with the nominee’s name pre-printed or a copy of the nominee’s recent bank statement/passbook (which is not more than three months old).

If the transmission amount is up to Rs. 2 lakhs, the nominee's signature should be attested by the Bank Manager. What if the transmission amount is more than Rs. 2 lakhs? In that case, as an operational risk mitigation measure, the nominee's signature shall be attested by a Notary Public or a Judicial Magistrate First Class (JMFC) in the space provided for signature attestation in the transmission form itself below the signature of the claimant.

4. Death of sole holder or all joint holders where there is no nominee

In this case, the legal heir(s) will have to submit the Transmission Request Form (Form T3), requesting the AMC for the transmission of units in favour of the legal heir(s). Along with Form T3, the claimant(s) will have to submit documents similar to what we discussed in the earlier section.

The claimant(s) will also have to submit additional documents for evidencing their relationship with the deceased unit holder(s), indemnity bond, individual affidavits, NOC from other legal heirs, etc. For all the above four scenarios, the list of documents to be submitted have been sourced from the AMFI website. 

In the above section, we have discussed four different scenarios for transmission. Depending on the scenario application, the claimant can download the copy of the applicable Transmission Form and the format for other documents from the AMFI website:

https://www.amfiindia.com/investor-corner/investor-center/procedure-to-claim.html

What happens after transmission?

After transmission, the beneficiary may hold on to the transferred units or redeem them. However, first, the units have to be transferred to the beneficiary. If the units have been transferred to the nominee, they are just the caretaker until the units are passed on to the legal heir(s). The nominee cannot deal with the units as per their wish unless the nominee's name is mentioned in the deceased person's Will or the nominee is the only legal heir.

Taxation on transmission

There is no capital gain tax on the transmission of mutual fund units. When the beneficiary sells the mutual fund units, for calculation of capital gains, the date on which the deceased person bought the mutual fund units will be considered, not the transmission date.

Ensure the smooth transfer of your mutual fund units to beneficiaries

In this article, we have discussed the various scenarios for transmission and how it is carried out. However, the transmission process can be complicated and time-consuming when no nomination exists. Also, when there is a nominee, but the legal heir/s object to the transfer of mutual funds to the nominee, the process can get complicated. Hence, it is recommended that all investors make a Will on how their assets (including mutual fund units) should be distributed after their death. The Will beneficiary may then be named as the nominee for the assets (including mutual fund units). It will ensure a smooth transfer of assets to the right beneficiary without any unwanted delays.

Investing in mutual funds with the Glide Invest App

In this blog, we have understood the transmission process for transferring mutual fund units to the beneficiary/beneficiaries in the event of an investor's death. You can partner with the Glide Invest App for your financial planning journey to get recommendations for the appropriate mutual fund schemes based on your risk profile. You will get advice on planning and systematically investing towards your financial goals

With Glide Invest, you will get guidance for:

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  7. Hand holding you till your financial goals are achieved

To start investing towards your financial goals, download the Glide Invest App from Google Play Store or Apple App Store and get started.

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