Starting an investment takes time and money, and the reason we make the effort is because we want to achieve our financial goals - be it the education of our child, their marriage, or even our own retirement.
Wouldn’t it be terrible if all this went to waste?
With World Health Day around the corner, you might be encouraging your children to live healthy, so they can have happy futures. But have you made the arrangements to ensure that their future is secure, even if you are not around?
Whether it’s a bank account, mutual fund, demat account or any other financial asset, it’s important to properly plan for the same. Nomination is a way toensure your children benefit from your investments. Let’s understand how it works.
Nomination in a mutual fund
Nomination makes it easy to transfer the units of a mutual fund investment upon the death of the investor to the nominee.
Nomination is when you appoint someone to take care of your assets in case something unfortunate happens to you.
A nominee could be anyone—a family member, a friend or even an acquaintance. Make sure you pick someone you can trust to take care of your investments after you.
As a mutual fund investor, you should know that:
- You can register up to three nominees (including a minor i.e. person below the age of 18) in a portfolio
- You can specify the percentage of the amount you want to allocate to each of them. If you don’t, each nominee gets the same share of your investments.
- If you’re nominating a minor, you’ll have to mention the name and other particulars of the minor’s guardian.
Some asset management companies (AMC) do not allow more than one nominee per portfolio; therefore, it’s important to research the mutual fund company and the company’s criteria for nominating individuals.
If you want to change the nominees, you can do it any and as many times as you want to. Also, you don’t have to inform the nominee about the change.
In case you make any additional investment in the same portfolio then your nomination is applicable to the new investment too.
How to nominate a person in a mutual fund?
The nomination process is as simple as filling out the details in the mutual fund investment form.
In the case of joint holders, if something happens to one of the unit holders, then the benefits are transferred to the surviving holder.
If both joint holders pass away, then the nominee avails the benefits.
When there’s no nominee, a claimant would have to produce a host of documents such as a legal heir certificate, will and testament, no-objection certificate from other legal heirs, and more to transfer the units in his/her name.
In case an investor has a will AND a nomination that is in conflict, the will supersedes the nomination.
It’s extremely easy and helpful to appoint a nominee in your mutual fund investment so make sure you take the time to do it properly.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.