What is Nomination in Mutual Funds?

hemanth477
Dec 28, 2024
3 min read

Updated: Jan 3

Nomination is a crucial aspect of mutual fund investing that allows a unit-holder to name a person (the nominee) who can claim the units or the redemption proceeds in case of the unit-holder’s death. This process ensures that your investments are passed on smoothly to your loved ones.

Who Can Nominate?

Nomination can be made ONLY by individuals applying for or holding units on their own behalf, either singly or jointly. This means that if you are investing in mutual funds in your personal capacity, you have the right to nominate.

Who Cannot Nominate?

Power of Attorney Holder (PoA): A PoA holder investing in mutual fund units on behalf of someone else cannot nominate.
Guardian of a Minor: A guardian investing on behalf of a minor cannot nominate. The guardian is appointed to manage the financial affairs of the minor until they reach the age of majority. Any transactions made by the guardian must be ratified by the minor once they reach the age of majority. Therefore, the guardian cannot be a nominee in the same account, as the decision ultimately lies with the minor.

Who Cannot Be Nominated?

The nominee shall not be a trust (other than a religious or charitable trust), society, company/body corporate, partnership firm, Hindu Undivided Family (HUF), etc.

How to Nominate?

Nomination can be made either at the time of the initial application for the purchase of units or subsequently. Here’s how you can do it:

At the Time of Initial Application: When investing with a mutual fund for the first time, you can fill up the ‘Nomination’ section provided in the account opening application form.
Subsequently: To register a nomination later, you need to fill up the prescribed Nomination Form and submit the duly completed form at the designated investor service center of the mutual fund or its Registrars.

Key Points to Remember:

Multiple Nominees: You can nominate up to three persons and clearly indicate the percentage of allocation/share in favor of each nominee. The allocation must be in whole numbers without any decimals. If the percentage is not specified, the AMC will settle the claim equally among all nominees.
Signature Requirement: The Nomination Form must be signed by the unit holder with a hand-written signature. In the case of joint holders, all joint holders must sign the nomination form, regardless of the mode of operation of the account (i.e., whether by ‘anyone or survivor’ or ‘jointly’).
Flexibility: Nomination can be changed subsequently any time and any number of times.

Why is Nomination Important?

Nomination simplifies the process of transferring your investments to your loved ones. Without a nominee, the units will be passed on to legal heirs according to succession laws, which can involve lengthy and sometimes expensive procedures, especially if no will is present. By nominating, you make it easier for your loved ones to claim the funds with minimal paperwork.

Claiming Units After the Death of the Unitholder

To claim units, the nominee needs to complete the following:

KYC Process: If not already done.
Proof of Death: Submit a death certificate.
Attested Signature: Provide their attested signature.
Guardianship Proof: If the nominee is a minor, submit guardianship proof.
Other Documents: Furnish any other required documents.

At Miles Wealth, we ensure a seamless and efficient process for nominees. By making nomination mandatory at the time of account opening, we help you plan better for your loved ones' future.

Conclusion

Nomination is a vital step in securing your mutual fund investments for your loved ones. By understanding the latest guidelines and incorporating them effectively, you can ensure a smooth transfer of your assets. At Miles Wealth, we make the nomination process straightforward and hassle-free, giving you peace of mind knowing that your investments are well-protected.

Disclaimer: This blog is for educational purposes only. The securities/investments mentioned here are not recommendations.

P.S. If mutual funds are on your mind, check out Miles Wealth! We make investing easy with personalised mutual funds tailored to your risk tolerance and financial goals. No need to be a finance expert or spend hours researching—just invest in funds that truly fit you. Download Miles Wealth today!