What happens to investments when the holder dies without nominating anyone?

Your family could face difficulties as getting a succession certificate from court is easier said than done

In order to bring about much-needed uniformity across fund houses in dealing with the transfer of assets due to the demise of unitholders, The Association of Mutual Funds in India (Amfi) has now updated its set of guidelines for the transfer of mutual fund investments in which the deceased unitholder hasn't nominated anyone. 

Pranjal  Kamra, CEO, Finology says, “The uniform norms introduced by Amfi will ensure standardisation of transmission procedures across mutual fund companies and will help the legal heirs/claimants acquire their investments conveniently.” 

While we place a lot of importance on wealth creation as individuals, it is equally essential to ensure protection and succession of wealth, with nomination being a critical first step in that direction. 

Devang Kakkad, Head-Research & Advisory, Equirus Wealth Management, says, “Nomination ensures the hassle-free transfer of units to the nominee(s) in the event of the unitholder's demise. In the absence of a nominee, the relatives and heirs of the unitholder will have to establish their claim by producing several documents to get the assets transferred to their names.” 

Through the process of nomination, the nominee becomes the recipient of the property of the deceased and is required to hold it for the benefit of the actual owner, in case such an owner (through will or succession law) happens to be somoene else, and not the nominee himself. 

Ajay Shaw, Partner, DSK Legal, says, “In case no nomination has formally been made by the deceased original holder, the proceeds and benefits of an insurance policy, bank deposit account, Demat account or mutual fund units will be vested as per the will of the deceased holder, in case such a document exists. In case it doesn't, then the assets go to the legal heirs as determined by Indian succession laws." 

Shaw adds, “However, this is easier said than done, since insurers, fund houses, depository participants and banks generally require an order/succession certificate from a court of competent jurisdiction to release the proceeds or benefits, which is itself an expensive, time-consuming process fraught with legal challenges.”

Mutual funds: Thankfully, there are now set guidelines to iron out a few issues in this space. AMCs have to adopt a standard Transmission Request Form and a common set of supporting documents for transfer of units as prescribed by Amfi. With this, there will be a uniform request form and uniform documentation across fund houses to deal with the transfer of units, which would be a great relief for claimants, who earlier had to undergo the transmission procedure prescribed by each AMC in case of investments in multiple fund houses. Jimmy Patel, Managing Director & Chief Executive Officer, Quantum AMC, says, “Where the nominee is not registered, in addition to the original or duly notarised or attested photocopy of the death certificate will be needed.” KYC confirmation of nominee or claimants or surviving unitholders will also be required. New bank mandate in AMCs specified format with attestation from bank branch manager, or a cancelled cheque with account number and holder’s name printed on the cheque or bank account statement would be needed. Fatca self-certification, and two additional legal documents must also be produced. These are: Indemnity bond signed by all legal heirs confirming the claim, and individual affidavits by legal heirs. Patel adds, “If the claim amount is above a certain limit, a notarised copy or probated will or succession certificate by a competent court or Letter of Administration would be required.” See box for details. 

  

Banking: Praveen Bhatt, EVP-Retail Liabilities and Direct Banking, Axis Bank, says, “In case, the nomination is not updated in the accounts, the funds lying in the accounts of the deceased customer are settled with the legal heirs of the deceased as per the mandate given by them, once they establish their identity.” Nomination in bank accounts can be done in favour of one person only. Nomination of more than one (up to two persons) is permissible in jointly-operated locker accounts with common consent. Banks may offer different types of joint-account relationships. For either or survivor type, even if there is no nomination in the account, the survivor will get the funds. The nominee can access the funds only if both accountholders die. In case there is no nomination in place, and both holders die, the legal heirs of both the depositors will get the funds. For anyone or survivor, on the death of both the depositors, the nominee gets access. In case there is no nomination, and all depositors die, legal heirs of all depositors will get the money. 

Common mistakes people make while nomination: Bhatt says, “In the case of a joint account, all account holders' consent is required, which they forget to put in the nomination, due to which the claim gets rejected. Nominee address not being mentioned in the nomination form may lead to difficulties in processing claim. Another mistake people make is not naming a new nominee in case the existing one dies before the asset owner. The difference in nominee name/relationship details etc. observed at the time of claim settlement can create a huge problem. Sometimes pet names are also filled in nominee name.”  

Insurance: Life insurance is bought to enable people to meet their long-term goals, and secure the future of their loved ones in case something were to happen to the policyholder, who is usually the primary breadwinner in the family. Kayzad Hiramanek, Chief-Operations & Customer Experience, Bajaj Allianz Life Insurance, says, “Insurers insist on adding nominations while purchasing life covers, or do extensive campaigns to get these details updated. It enables the nominees to have a smooth claim process. However, in the absence of a nominee, the legal heirs of the life insured can raise a claim with the company by submitting the claim documents along with succession certificate or any other proof of title.” Remember, various factors determine the real beneficiaries. Usually insurers pay the claim amount to class-I legal heirs such as son, daughter, widow, mother etc. But, if you have a Will, then the proceeds will be distributed as per the wishes stated in the document, as per the Indian Succession Act, 1925. But remember, the absence of nomination can lead to a difficult experience for your family as getting a succession certificate from court is easier said than done. Your dependents need to go through a lengthy legal process and a lot of hassles to obtain it. 

What would happen in case there is no nominee? 

 

The claimant would have to submit the following documents:

• Transmission Request Form (Form T3) for Transmission of Units to the Claimant
• Death Certificate of the deceased unitholder(s) in original or photocopy duly attested by a notary public or Gazette Officer
• Copy of birth certificate in case the claimant is a minor
• Copy of PAN card of the claimant/guardian (in case the Claimant is a minor).
• KYC acknowledgment or KYC form of the claimant/guardian (in case the claimant is a minor)
• Cancelled cheque with claimant’s name pre-printed or Copy of claimant’s recent bank statement/passbook (which is not more than three months old).

A person mentioned in the Will of an MF unitholder or a legal heir or a relative may claim the money invested.

Source: AMFI 

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