How are mutual fund units transmitted after the demise of a unitholder?

Mutual funds allow investors to pool their money and invest in a variety of securities and asset classes through fund units. Upon the death of a mutual fund investor, their units can be transferred to a nominee or legal heirs through a process called transmission. However, the fund house needs to be notified with proper documentation to initiate the transmission process.

The main objective after the demise of the unitholder is to validate claimant details and prevent fraudulent transmissions of units.

This article outlines how are mutual fund units transmitted to inheritors after the death of a unitholder across various scenarios.

• Table of contents

1. Understand mutual fund units and their importance
2. Process of transferring mutual fund units after demise
3. Documents required for transmission of mutual fund units

Understand mutual fund units and their importance

Mutual funds are investment vehicles that pool money from multiple investors to invest in a portfolio of securities like stocks, bonds, etc. The smallest component of a mutual fund is called a 'unit'. When an investor puts money into a mutual fund, they purchase units of that fund based on the fund's net asset value (NAV) per unit. The NAV represents the total value of assets in the fund divided by the number of outstanding units.

A mutual fund unit is a proportional representation of the portfolio assets. It allows investors to gain exposure to a diverse mix of investments that would otherwise require large amounts of capital. Additionally, for individuals seeking steady investment growth, using an SIP mutual fund calculator can help in planning and estimating potential investment returns.

Process of transferring mutual fund units after demise

Upon the death of a mutual fund unitholder, their units can be transferred to either their nominee or legal heirs, as the case may be, through a process called transmission. The fund house needs to be notified with proper documentation for initiating transmission.

In case of joint holder

If the deceased was a joint holder, the units can be transmitted to the surviving holders by submitting a transmission request form, death certificate, KYC documents of surviving holders, bank details and fresh nomination form if applicable. Units will be blocked if the deceased is the first holder.

In case of nominee

For transmitting to a nominee, the claimant must submit a transmission request form, death certificate, KYC, and nomination form. The nominee must comply with KYC requirements before units can be transmitted. If the amount is above Rs. 5 lakh, the nominee's signature needs attestation.

Read Also:New KYC rules for Mutual Funds investments

In case of legal heirs

For legal heirs, in addition to the transmission request form, death certificate and KYC, they have to submit documents establishing their relationship with the deceased like a succession certificate and indemnity bond signed by all heirs. Additional proof of the relationship may be needed. A signature attestation is required if the claim amount exceeds Rs. 5 lakh.

In case of HUF

In the case of HUF, the new Karta must submit specified HUF-related documents like HUF declaration, indemnity bond and relationship proof. If there are no surviving co-parceners, units can be transmitted to claimants by providing a succession certificate and other papers.

The process aims to validate claimant details to prevent fraudulent transmissions. Overall, the fund house ensures compliance with guidelines and obtains proper documentation prior to transferring units. This maintains integrity and protects the interest of investors. The process may vary slightly across fund houses, but the objective is to transmit units efficiently and securely to the rightful inheritors.

Documents required for transmission of mutual fund units

A few of the documents required for this process are:

• Transmission request form:A standardized form provided by the mutual fund house
• Death certificate:A standardized form provided by the mutual fund house
• Self-attested PAN card of nominee
• KYC acknowledgment or KYC form for the nominee

  Additionally, there can be variations depending on whether units are being transferred to a joint holder, nominee or legal heir, whether the recipient is a minor or a major and whether the transfer amount exceeds Rs. 5 lakh. Documents may also vary across different mutual fund houses. It's advisable to consult with the respective AMC or a financial advisor for the most accurate and up-to-date information.

  Conclusion

  It is important to understand how are mutual fund units transmitted after unitholder's death to efficiently transfer units to the rightful inheritors. Obtaining proper documentation and validating claimant details helps fund houses to prevent fraudulent transmissions. Despite slight variations across fund houses, the overall transmission process maintains integrity through compliance with regulations. Secure transfer of units to successors sustains investor trust and protects the interests of all stakeholders.

  FAQs

  What happens to the mutual fund units owned by a deceased unitholder?

  Upon the death of a mutual fund unitholder, their units can be transmitted to either their registered nominee or legal heirs through a process called transmission. The fund house needs to be notified with proper documentation to validate claimant details and prevent fraudulent transfers. The overall objective is to efficiently transfer units to the rightful inheritors after the demise of an investor.

  Can the beneficiaries of the deceased unitholder claim the mutual fund units directly?

  Yes, the registered nominee or legal heirs of the deceased unitholder can claim the mutual fund units directly through a process called transmission. The fund house needs to be notified with proper documentation like a death certificate, KYC details, and relationship proof to validate claimant details. Units will be transferred to the rightful inheritors after validating the transmission request to prevent fraudulent claims.

  Who is responsible for transferring the mutual fund units after the demise of a unitholder?

  The mutual fund house or the AMC through its registrar and transfer agent (RTA) is responsible for transferring the mutual fund units to the nominee or legal heirs after the demise of a unitholder. The mutual fund house/RTA needs to validate the claimant's details and obtain necessary before transmitting units.

  What is transmission?

  Transmission is the process of transferring mutual fund units from a deceased unitholder to the designated beneficiary, which can be the joint holder, the nominee, or the legal heir.

  How is transmission of units done?

  If the primary unitholder passes away, the mutual fund units may be transferred to the surviving joint holder. a designated nominee or the legal heir.

  To initiate the transmission process, the claimant must submit a transmission request form along with the necessary supporting documents.

  How do we transmit mutual fund units if there are two holders?

  If the primary unitholder passes away and the joint holder/s survive, the surviving joint holder becomes the new primary unitholder. In this scenario, a Transmission of Units Form T-2 should be used. If the deceased individual was a secondary or tertiary joint holder, a Transmission of Units Form T-1 should be used to remove their name from the account.

  Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.