How to settle a death claim in mutual fund investments?
Mutual funds have well-defined processes in place in case of an unfortunate death of a unit holder. Depending on the structure of investment holding, one should do the paperwork.
Mutual funds are perceived to be a simple, yet effective, investment vehicle for investors with varied risk profile and investment objectives. While the hallmark of the industry’s growth has been its ability to launch innovative products to suit varied needs of investors, it has done its bit even on the client servicing front. Today, there are well defined procedures for handling various service requests as well as redressing investor grievances and the processing time has significantly reduced over the years.
Although the procedure and rules for activities such as making investment, redemption of units and switching the holdings from one scheme into another are well established, there are areas like settling a death claim that still have some ambiguity and lack of awareness. Considering that an unfortunate event of the death of a loved one can be emotionally draining for the family and can also put a strain on its finances, knowing what needs to be done while applying for settling a death claim can mitigate the hardship of the nominee or the surviving unit holders. This article is an attempt to create awareness about what needs to do while applying for transmission/redemption of units on account of the death of the sole or the first holder. Transmission is a process whereby units held in the name of deceased unit holder are transferred either to the surviving unit holders or nominee/ legal heirs.
Pattern of holding
The units of mutual funds can be held either singly or jointly (a maximum of three applicants) on either or survivor or joint basis . The units can also be held as Karta of HUF. If the sole holder or the first holder dies, the documents required are based on the pattern of holding and the current value of investments. While the pattern of holding could be with or without a nomination, the documentation required depends on the threshold limit set by mutual funds. In other words, this threshold limit varies from fund house to fund house.
If the units are held singly with nomination
In case the units are held singly with nomination and the sole holder dies, the nominee has the option of either redeeming the units or opting for transmission of units in his/her name. The request can be made by way of a letter in a format prescribed by the fund houses. The request has to be submitted along with the following documents:
• Death Certificate of deceased unitholder in original or photocopy notarized or attested by gazetted officer or a bank manager.
• Bank account details of the nominee (in a standard format) attested by the Bank Manager along with cancelled cheque bearing the name of the nominee.
• KYC of the nominee bearing PAN no. and the name of the nominee.
If the transmission amount is below the threshold limit, any appropriate document evidencing relationship of the nominee with the unit holder needs to be submitted. If the transmission amount is above the threshold limit, a Notarized copy of probated will or legal heir certificate or Succession certificate or Claimant’s certificate issued by a competent court or Letter of Administration in case of Intestate Succession needs to be submitted.
If the claimant is a minor, the following additional documents are required:
• Proof of date of birth of minor nominee
• Letter from guardian declaring that he/she is the guardian of the minor and stating his/her relationship to the minor along with court order/decree, if applicable.
If the units are held singly without a nomination
If the units are held singly without a nomination, the process can be tedious as apart from the documents mentioned above, some more documents will have to be submitted. These are:
• Indemnity Bond from legal heir/s on stamp paper /franked for value as applicable in the respective State of execution of the Indemnity bond (standard format)
• Individual affidavits from legal heir/s on stamp paper / franked for value as applicable in the respective State of execution of the Affidavit.
If the nominee decides to get the units transmitted, the tax liability, if any, will arise only at the time of redemption of units.
If the units are held jointly
Mutual fund units can be held jointly. If the first holder dies, the units can be transmitted to the second holder. This can be done by submitting a letter in a standard format along with the Death Certificate in original or photocopy notarized or attested by the gazette officer or a bank manager. If the surviving unitholder becomes the sole holder after transmission of units, it will be mandatory for him/her to make a nomination.
In case the units are transmitted to the surviving unitholder/s, there are no tax implications. If they decide to redeem units, the tax rules with respect to short term/ long-term capital gains will apply.
Transmission in case of HUF, due to the death of Karta
Although the affairs of HUF are managed by the Karta, it does not come to an end in the event of his death. Hence, the members of the HUF can appoint a new Karta who needs to submit the following documents for transmission of units:
• Letter requesting for change of Karta in a standard format duly signed by the new Karta.
• Death certificate in original or photocopy duly notarized or attested by the gazette officer or a bank manager.
• Duly certified bank certificate stating that the signature and details of new karta have been appended in the bank account of the HUF.
• KYC of the new karta and KYC of HUF, if not already available.
• Proof of identification of the new karta.
• Indemnity bond signed by all the surviving coparceners and new Karta. Indemnity bond on stamp paper / franked of value as applicable in the respective State of execution of the indemnity bond.
In case there is no surviving coparceners or if the transmission amount is more the threshold limit or where there is an objection from any surviving members of the HUF, the transmission can be effected only on the basis of a Notarized copy of Settlement Deed or Notarized copy of Deed of Partition or Notarized copy of Decree of the relevant competent Court.
Happy Investing
Mutual funds have well-defined processes in place in case of an unfortunate death of a unit holder. Depending on the structure of investment holding, one should do the paperwork.
Mutual funds are perceived to be a simple, yet effective, investment vehicle for investors with varied risk profile and investment objectives. While the hallmark of the industry’s growth has been its ability to launch innovative products to suit varied needs of investors, it has done its bit even on the client servicing front. Today, there are well defined procedures for handling various service requests as well as redressing investor grievances and the processing time has significantly reduced over the years.
Although the procedure and rules for activities such as making investment, redemption of units and switching the holdings from one scheme into another are well established, there are areas like settling a death claim that still have some ambiguity and lack of awareness. Considering that an unfortunate event of the death of a loved one can be emotionally draining for the family and can also put a strain on its finances, knowing what needs to be done while applying for settling a death claim can mitigate the hardship of the nominee or the surviving unit holders. This article is an attempt to create awareness about what needs to do while applying for transmission/redemption of units on account of the death of the sole or the first holder. Transmission is a process whereby units held in the name of deceased unit holder are transferred either to the surviving unit holders or nominee/ legal heirs.
Pattern of holding
The units of mutual funds can be held either singly or jointly (a maximum of three applicants) on either or survivor or joint basis . The units can also be held as Karta of HUF. If the sole holder or the first holder dies, the documents required are based on the pattern of holding and the current value of investments. While the pattern of holding could be with or without a nomination, the documentation required depends on the threshold limit set by mutual funds. In other words, this threshold limit varies from fund house to fund house.
If the units are held singly with nomination
In case the units are held singly with nomination and the sole holder dies, the nominee has the option of either redeeming the units or opting for transmission of units in his/her name. The request can be made by way of a letter in a format prescribed by the fund houses. The request has to be submitted along with the following documents:
• Death Certificate of deceased unitholder in original or photocopy notarized or attested by gazetted officer or a bank manager.
• Bank account details of the nominee (in a standard format) attested by the Bank Manager along with cancelled cheque bearing the name of the nominee.
• KYC of the nominee bearing PAN no. and the name of the nominee.
If the transmission amount is below the threshold limit, any appropriate document evidencing relationship of the nominee with the unit holder needs to be submitted. If the transmission amount is above the threshold limit, a Notarized copy of probated will or legal heir certificate or Succession certificate or Claimant’s certificate issued by a competent court or Letter of Administration in case of Intestate Succession needs to be submitted.
If the claimant is a minor, the following additional documents are required:
• Proof of date of birth of minor nominee
• Letter from guardian declaring that he/she is the guardian of the minor and stating his/her relationship to the minor along with court order/decree, if applicable.
If the units are held singly without a nomination
If the units are held singly without a nomination, the process can be tedious as apart from the documents mentioned above, some more documents will have to be submitted. These are:
• Indemnity Bond from legal heir/s on stamp paper /franked for value as applicable in the respective State of execution of the Indemnity bond (standard format)
• Individual affidavits from legal heir/s on stamp paper / franked for value as applicable in the respective State of execution of the Affidavit.
If the nominee decides to get the units transmitted, the tax liability, if any, will arise only at the time of redemption of units.
If the units are held jointly
Mutual fund units can be held jointly. If the first holder dies, the units can be transmitted to the second holder. This can be done by submitting a letter in a standard format along with the Death Certificate in original or photocopy notarized or attested by the gazette officer or a bank manager. If the surviving unitholder becomes the sole holder after transmission of units, it will be mandatory for him/her to make a nomination.
In case the units are transmitted to the surviving unitholder/s, there are no tax implications. If they decide to redeem units, the tax rules with respect to short term/ long-term capital gains will apply.
Transmission in case of HUF, due to the death of Karta
Although the affairs of HUF are managed by the Karta, it does not come to an end in the event of his death. Hence, the members of the HUF can appoint a new Karta who needs to submit the following documents for transmission of units:
• Letter requesting for change of Karta in a standard format duly signed by the new Karta.
• Death certificate in original or photocopy duly notarized or attested by the gazette officer or a bank manager.
• Duly certified bank certificate stating that the signature and details of new karta have been appended in the bank account of the HUF.
• KYC of the new karta and KYC of HUF, if not already available.
• Proof of identification of the new karta.
• Indemnity bond signed by all the surviving coparceners and new Karta. Indemnity bond on stamp paper / franked of value as applicable in the respective State of execution of the indemnity bond.
In case there is no surviving coparceners or if the transmission amount is more the threshold limit or where there is an objection from any surviving members of the HUF, the transmission can be effected only on the basis of a Notarized copy of Settlement Deed or Notarized copy of Deed of Partition or Notarized copy of Decree of the relevant competent Court.
Happy Investing
Source : Moneycontrol.com
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