In recent years, there has been a significant increase in the number of people investing in mutual funds, driven by a growing awareness of the need to secure one’s financial future. However, it is equally important to plan for the unexpected and ensure that your funds are passed on to the right person in case of your demise. By adding a nominee through a simple procedure, you can safeguard your family’s financial well-being.
Previously, adding a nominee to your mutual fund investments was optional, but the Securities and Exchange Board of India (SEBI) has now made it mandatory. Failure to add a nominee or opt out of the nomination can result in the freezing of your portfolio, preventing you from investing or withdrawing money from your funds. The original deadline for adding a nominee was 31 March 2022, which was extended to 31 March 2023. However, a recent circular from SEBI has further extended the deadline to 30 September 2023.
So, what exactly is a mutual fund nomination? It involves appointing a person to take charge of your investments after your death, ensuring a smooth transfer of your funds. This process is also known as the transmission of units.
The need to add a nominee to your mutual fund investments is driven by SEBI’s mandate. By doing so, you can prevent your portfolio from being frozen and ensure that your investments continue to grow. While opting out of the nomination is an option, adding a nominee offers several benefits. Here are some reasons why you should consider adding a nominee:
- Smooth transfer of funds: Adding a nominee ensures that your investments are transferred to the nominee without any hassle. Without a nominee, your beneficiaries would have to go through a lengthy and expensive process to claim the funds.
- Reduces family disputes: By adding nominees, you can allocate a specific percentage of your portfolio to each nominee, thereby minimizing the potential for family conflicts. You have the control to decide how your investments will be distributed among your nominees.
- Eliminates document hassles: Without a nominee, your family members would be required to produce various documents, such as a will, a no-objection certificate, your death certificate, and other declarations, to claim the mutual funds. Adding a nominee simplifies the process and reduces the burden on your family.
- Peace of mind: By adding a nominee, you can live a stress-free life, knowing that your investments will go to the person of your choice.
Now, let’s address some important queries related to mutual fund nominations:
Who can nominate and be nominated?
Only individuals holding their own units, either individually or jointly, can nominate a person. Power of attorney (PoA) holders and guardians cannot nominate or be nominated for mutual funds on behalf of the investor, except in the case of minors. Minors can choose their nominees after attaining the age of majority. Nominees can be individuals, including minors, as well as entities like NRIs, government bodies, and charitable trusts. In the case of minors, the guardian’s name and address must be provided by the person making the nomination. Certain entities like trusts, societies, companies, partnership firms, and Hindu undivided families (HUFs) cannot be nominated.
How to add nominees to your mutual fund ACCOUNT online?
With the mandatory requirement to add a nominee, you can conveniently add nominees online. Instead of visiting each mutual fund house’s website individually, you can add nominees on platforms like Karvy (KFintech), CAMS, and MFCentral. These platforms act as transfer agents and provide backend services to mutual fund companies. By logging into their websites, you can update your nomination details for all your mutual funds. Each platform may have a slightly different process, but you will generally need to provide your PAN number, select the relevant folios or funds, add nominee details, and verify the information through an OTP.
Not adding a nominee before the deadline can have implications. Your account will be frozen, preventing you from investing or redeeming funds. If you opt out of the nomination, your investments can still be accessed, but your beneficiaries or legal heirs will face a complex and time-consuming process to claim the investments after your demise. They would need to submit various documents, including a letter requesting transmission of units, the death certificate, verified KYC of the claimants, bank-related documents, and legal certificates, depending on the circumstances. Adding a nominee saves your family members from unnecessary stress and ensures a smoother claim process.
CAMS and Karvy are mutual fund transfer agents that provide backend services to various mutual fund companies. Through their respective websites, you can easily update your nomination details for all your mutual funds.
To update your nominee with Karvy (KFintech), you can follow these steps:
- Visit the Karvy nominee updation page.
- Enter your PAN number and select all the folios you want to update.
- An OTP will be sent to your mobile number and registered email. Enter the OTP to complete the verification process.
- After verification, you will see a list of mutual funds managed by Karvy. Select the funds and add the nominee details. Verify the information through OTP.
To update your nominee with CAMS, you can follow these steps:
- Visit the CAMS nominee updation page and enter your PAN number.
- Choose whether you want to receive the OTP via email or mobile.
- Enter the OTP to view all your mutual fund investments under CAMS.
- Select the funds for which you want to update nominee details and proceed to the next step.
- Register the nominee by providing their details.
- Proceed to add the nominee details and verify them with an OTP.
For offline nominee updation, you can fill out the nomination form and submit it to Karvy and CAMS offices.
MF Central is an all-in-one investment management platform conceived by CAMS and KFintech. To update your mutual fund nomination with MF Central, you can follow these steps:
- Visit the MF Central website and create an account using your PAN.
- Once logged in, you will see a list of all your mutual funds.
- Select the funds and update your nominee by providing the necessary details.
- Confirm the information with the OTP sent to your mobile or registered email address.
Regarding demat and trading accounts, SEBI has made it mandatory to add a nominee or opt out of the nomination. The procedure for adding a nominee may vary among different brokers. Here are the steps for adding nominees to popular brokers:
- Groww: Login to your account, go to account details, visit the add nominee page, fill in the nominee details, and e-sign with Aadhar OTP. For subsequent changes or additions, you may need to do it offline or contact Groww’s customer support.
- Zerodha: Login to console.zerodha.com/dashboard, click on account, select nominees, enter nominee details (up to three nominees), upload nominee ID proof, allocate the share, e-sign with OTP, and wait for the nominee to be added within 72 hours.
- UpStox: Login to your Upstox account, go to my account, select ‘My nominees,’ click on add nominee, fill in the nominee details, allocate the share, continue to e-sign the form with OTP, and your nominee details will be updated within 72 hours.
- HDFC Securities: Visit the HDFC nomination page, login to your HDFC securities account, add nominees (up to three), confirm the details, and e-sign with OTP.
- ICICI Direct: Login to your ICICI direct account, follow the on-screen prompts to add a nominee or go to the ‘Personal Details’ tab in settings, scroll down to ‘Trading Nominee,’ click ‘Add Nominee,’ enter the nominee details, and submit. You can also add nominees offline by submitting an application form at an ICICI Bank or ICICI Direct branch.
Not adding a nominee before the deadline of 30 September 2023 can result in the freezing of your account, preventing you from investing or redeeming funds. If you opt out of the nomination, your beneficiaries or legal heirs will have to go through a complex procedure to claim your investments after your demise. This involves submitting various documents such as a letter requesting transmission of units, death certificate, verified KYC of the claimants, bank-related documents, and legal certificates depending on the circumstances.
FAQs related to Addition of nominee in mutual funds
What is the maximum number of nominees I can add to mutual funds?
You can nominate up to three persons for your mutual funds.
Can nominations be done online for mutual funds?
Yes, you can add nominees to your mutual funds online through platforms like CAMS, Karvy, or MF Central.
What happens if I don’t add nominees to my accounts?
If you fail to add a nominee before the deadline of 30 September 2023, your account may freeze, and you won’t be able to invest or redeem your funds. In the event of your demise, your beneficiaries or legal heirs will have to go through a lengthy and complex procedure to claim your investments.
What documents are required to claim investments if there is no nominee added?
To claim investments without a nominee, the following documents are typically required:
- A letter to the fund house requesting transmission of units.
- Original or attested photocopy of the death certificate of the deceased investor.
- Verified KYC of the claimants.
- A cancelled cheque or attestation from the claimant’s bank manager or bank account statement.
- A bank mandate on the bank’s letterhead or with the bank’s seal.
- Foreign Account Tax Compliance Act (FATCA) self-certification document.
- An indemnity bond signed by all legal heirs.
- A copy of the notarized will or succession certificate by a competent court.
Are there any implications of not adding a nominee?
Not adding a nominee can lead to account freezing and restrictions on investing or redeeming funds. It also creates additional difficulties for your beneficiaries or legal heirs in claiming your investments after your demise.
How can I update or change the nominee details for my mutual funds?
To update or change nominee details for your mutual funds, you can typically do it online through the respective platforms such as CAMS, Karvy, or MF Central. Log in to your account, navigate to the nominee updation section, and follow the provided instructions. Alternatively, you can update nominee details offline by filling out a nomination form and submitting it to the offices of the transfer agents.
Can I allocate different percentages or shares to different nominees?
Yes, in most cases, you can allocate different percentages or shares to different nominees. When updating nominee details, you will have the option to specify the percentage allocation for each nominee. Ensure the total allocation adds up to 100%.
