Planning where to invest in mutual funds, stocks, fixed deposits, insurance, and retirement plans often takes years. We monitor markets, compare returns, and rebalance portfolios.
However, nomination is a small checkbox that many investors overlook. And if you skip this one step, your family’s well-planned investments could turn into a long, stressful struggle for your family. Let’s discuss what actually happens to your funds in the event that you don’t have a mutual fund nominee.
What is a nominee?
A nominee is the person you officially authorize to receive your investments after your death.
Consider a nominee as an intermediary between your legal heirs and your investments.
They assist financial institutions in determining to whom to transfer funds in the event that you pass away.
One of the most common misconceptions is that my family will automatically get the money.
A lot of people believe, “My spouse is aware of my investments.” No matter how close your family is to you, the process becomes complicated if there is no nominee. Regretfully, financial institutions don’t operate on presumptions. They work with documentation and records.
What Happens If You Don’t Add a Nominee in Mutual Funds?
The investment itself is safe if a mutual fund folio lacks a registered nominee, but it becomes more difficult for your family to access it. Before releasing any funds, mutual fund companies and registrars must strictly adhere to legal and regulatory procedures; in the absence of a nominee, this process becomes much more intricate and time-consuming.
The funds are still invested, but they are essentially locked.
Your mutual fund units continue to stay invested in the scheme and remain market-linked. There is no loss of ownership or value due to the absence of a nominee. However, AMCs (Asset Management Companies) are unable to simply transfer or redeem these units in the event of the investor’s passing. Even if they are the legitimate heirs, family members cannot access the investments until a legitimate claimant is found and validated.
Heirs are required to have legal documentation
Before releasing the investments, AMCs must determine the legal heirs in cases where no nominee is registered. This means that formal proof of entitlement must be provided by the family.
Heirs might be required to provide documents like
- A succession or legal heir certificate from an authorized body
- Affidavits from the court verifying the claimant’s entitlement to the investment
- Indemnity bonds to shield the AMC from upcoming lawsuits
- Proof of identity and relationship for each claimant. Legal processes, numerous trips to government buildings or courts, and extra costs are frequently involved in obtaining these documents.
The claim process takes longer
Each folio may need to be claimed separately, and due to document verification, the process can take several months to complete.
Adding a nominee is simple and free
Most mutual fund platforms and AMCs allow investors to:
- Add nominee or update nominee online
- Change nominee details anytime
- Complete the process at no cost
A few minutes today can save months of stress for your family later.
Not having a nominee costs your loved ones peace of mind, not money. One of the simplest yet most effective financial planning steps is a straightforward nomination. Take a few minutes today to review and update your nominee information if you have already made an investment. It’s a tiny action that has a significant impact.
FAQs
Will my investments be lost without a nominee?
Your investments will become very difficult for your legal heirs to recover, but they won’t be permanently “lost” or seized by the government.
Who can claim the investments if there is no nominee?
If there is no nominee for investments, the legal heirs, as determined by a will or succession laws, are entitled to claim the assets.
Does a nominee become the owner of the investment?
A nominee does not immediately acquire ownership of an investment. They have the authority to accept the assets from the financial institution on behalf of the legitimate heirs, acting as a trustee or custodian.
Can I add or change a nominee later?
Yes, even after the initial investment, you have the option to add, modify, or update a nominee for your mutual fund investments.
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Further Read;
How Exit Loads Impact Your Scheme Returns