How to Claim Mutual Fund Investments After the Death of an Investor

Investing in mutual funds is a smart financial decision that helps individuals grow wealth and achieve their financial goals. However, in the unfortunate event of an investor’s death, their mutual fund investments need to be transferred to the rightful beneficiaries. This process can be complex if the necessary steps are not followed correctly.

In this detailed guide, we will explain who can claim mutual fund investments, the step-by-step process for claiming them, the required documents, and the tax implications involved.

Who Can Claim Mutual Fund Investments?

After the death of an investor, the mutual fund investments can be claimed by certain individuals based on their legal relationship with the deceased. The claim process differs slightly depending on whether the claimant is a joint account holder, a nominee, or a legal heir.

1. Joint Account Holder

• If the mutual fund account was held jointly, the surviving account holder automatically becomes the sole owner of the mutual fund units.
• The units are transferred in the surviving holder’s name without the need for additional documentation, except for a death certificate.
• If both joint holders pass away, the nominee or legal heir can claim the units.

2. Nominee

• If the investor had appointed a nominee, the mutual fund units are transferred to the nominee upon the investor’s death.
• A nominee does not become the owner of the units permanently but acts as a trustee for the legal heirs.
• If there are multiple nominees, the units will be divided according to the percentage mentioned in the nomination form.

3. Legal Heirs

• If no nominee was registered, the legal heirs of the deceased investor can claim the mutual fund investments.
• The legal heirs must provide legal documents such as a succession certificate or probated will to establish their claim.
• In the absence of a will, all legal heirs have an equal right to claim the investments.

Documents Required for Claiming Mutual Fund Investments

To ensure a smooth transfer of mutual fund investments, claimants must submit specific documents based on their category (joint holder, nominee, or legal heir).

For Joint Account Holders or Nominees

If the surviving joint holder or nominee is claiming the investment, the following documents are required:

• Transmission Request Form – A formal request for the transfer of mutual fund units.
• Death Certificate – A notarized copy of the death certificate of the deceased investor.
• KYC Documents – PAN card, Aadhaar card, or other valid identity proof of the claimant.
• Bank Details – A canceled cheque or attested bank statement of the claimant.
• Guardian Documents (if applicable) – If the nominee is a minor, the guardian’s KYC documents and the nominee’s birth certificate must be submitted.

For Legal Heirs

If no nominee was registered, the legal heir must submit additional documents to claim the mutual fund units:

• Indemnity Bond – A bond signed by all legal heirs confirming their claim.
• Affidavit by Legal Heirs – A sworn statement declaring their legal right to claim the investment.
• Probated Will or Succession Certificate – A notarized copy of the will (if available) or a legal succession certificate issued by a court.
• No-Objection Certificate (NOC) – If multiple heirs exist, an NOC from other legal heirs may be required.

Step-by-Step Process to Claim Mutual Fund Investments

Step 1: Contact the Fund House

The claimant must reach out to the mutual fund company or asset management company (AMC) where the deceased investor held their investments.

Step 2: Submit the Required Documents

The claimant must submit the transmission request form along with all necessary documents mentioned above.

Step 3: Verification by the Fund House

The AMC will verify the documents, cross-check the nominee or legal heir details, and confirm the claim. If all documents are in order, the request moves to the next stage.

Step 4: Processing the Transfer

• If the claim is straightforward (for a nominee or joint holder), the transfer is usually completed within 10-15 business days.
• If a legal heir is claiming the funds and legal documents are required, the process may take longer, depending on court procedures.

Step 5: Distribution of Investments (if Multiple Claimants)

• If multiple nominees exist, the mutual fund units are distributed as per the nomination details.
• If legal heirs are claiming the investments, the division occurs based on the will or succession laws.

Tax Implications of Claiming Mutual Fund Investments

One of the most important aspects to consider when claiming mutual fund investments is taxation.

• No Capital Gains Tax on Transmission
  
  
  • When mutual fund units are transferred from a deceased investor to a nominee or legal heir, no capital gains tax is applicable. This is because it is considered an inheritance, not a sale.
• Tax on Future Gains
  
  
  • If the new owner sells the mutual fund units after the transfer, capital gains tax will apply based on the holding period and the applicable tax rules.
  • If the units were held for more than 12 months, long-term capital gains tax (LTCG) applies.
  • If the units were held for less than 12 months, short-term capital gains tax (STCG) applies.
• Tax on Dividends
  
  
  • If the mutual fund scheme provides dividends, the new claimant must pay tax on dividend income as per their applicable income tax slab.

Tips to Ensure a Smooth Claim Process

To avoid complications in claiming mutual fund investments, investors should take the following precautions:

✔ Appoint a Nominee – Always register a nominee to ensure a hassle-free transfer of investments.

✔ Keep Documents Updated – Ensure that nomination details, KYC records, and other important documents are regularly updated with the AMC.

✔ Maintain a Will – A legally valid will can prevent disputes among heirs and speed up the transmission process.

✔ Inform Family Members – Ensure that your family members are aware of your mutual fund investments and how to claim them in case of an emergency.

The process of claiming mutual fund investments after the death of an investor can be straightforward if the necessary steps are followed correctly. The presence of a joint account holder or nominee simplifies the process, whereas legal heirs may need to go through additional legal formalities.

By understanding the documentation, process, and tax implications involved, claimants can ensure a smooth transfer of mutual fund units. Additionally, investors can take proactive steps, such as appointing a nominee and maintaining an updated will, to make the process easier for their loved ones in the future.

By staying informed and prepared, you can safeguard your financial legacy and ensure that your investments benefit your family members as intended.