All You Need to Know About Mutual Fund Nomination

Mutual funds have emerged as one of the most preferred investment options, primarily due to their ease of use, affordability and potential to deliver significant returns. However, while investing in mutual funds, investors often overlook the importance of mutual fund nomination, which can cause significant legal and financial issues in the future. This article discusses everything you need to know about mutual fund nomination, including what it is, why it is important and how to nominate someone for your mutual fund investments.

What is Mutual Fund Nomination?

Mutual fund nomination is appointing an individual or entity as the nominee of the mutual fund investment. A nominee is a person who would receive the mutual fund units or the redemption amount in case of the death of the investor. The nomination process is simple and requires investors to fill out a nomination form with the fund house, providing the name, address, and relationship of the nominee.

Importance of Mutual Fund Nomination 

1. It helps ensure that the investments the investor makes are transferred to the intended person in case of their demise. Without nomination, transferring the mutual fund units or redemption amount can be lengthy and complicated, which can cause unnecessary financial and legal hassles for the family members of the deceased investor.
2. Mutual fund nomination helps avoid any potential conflicts or disputes between family members over the investments made by the deceased investor. Without nomination, multiple family members can claim the investments, leading to legal battles that can cause significant emotional and financial stress.
3. Mutual fund nomination helps ensure that the investments made by the investor are utilised for the intended purpose. For instance, if an investor wants to invest in mutual funds to secure their child's future, nominating the child as the nominee would ensure that the investments are utilised for the same.

How to Nominate Someone for Mutual Fund Investments?

The process of mutual fund nomination is simple and can be done during investing or after the investment has been made. Here are the steps to nominate someone for mutual fund investments:

• Step 1: Obtain the Nomination Form

Investors can obtain the nomination form from the mutual fund house's website or the nearest branch office. The form can also be downloaded from the Association of Mutual Funds in India (AMFI) website.

• Step 2: Fill out the Nomination Form

The next step is to fill out the nomination form with accurate details. The form typically requires the investor to provide their details, such as name, address and contact information, along with the nominee's details, such as name, address and relationship with the investor.

• Step 3: Submit the Nomination Form

After filling out the nomination form, investors need to submit the form to the mutual fund house's office. Investors can also submit the form online through the mutual fund house's website or the CAMS (Computer Age Management Services) portal.

• Step 4: Verify the Nomination

Once the nomination form is submitted, the mutual fund house will verify the details and confirm the nomination. The investor will receive a confirmation letter or email from the mutual fund house confirming the nomination.

Points to Remember While Nominating Someone for Mutual Fund Investments

Here are some crucial points that investors need to remember while nominating someone for mutual fund investments:

• Nomination is Optional

Nomination is optional and investors are not obligated to nominate anyone. However, it is recommended that investors nominate someone to avoid any potential legal or financial issues.

• Nominee's Rights

Nomination does not give any ownership rights to the nominee. The nominee is only entitled to receive the mutual fund units or redemption amount in case of the investor's death. The nominee neither can sell or transfer the units nor can they make any decisions related to the mutual fund investment.

• Multiple Nominees

Investors can nominate multiple nominees for their mutual fund investments and assign different percentages to each nominee. For instance, an investor can select two nominees and give a 50-50 percent share to each of them.

• Changing the Nominee

Investors can change the nominee any time by filling out a new nomination form and submitting it to the mutual fund house. It is essential to keep the nomination details up-to-date to ensure that the intended person receives the mutual fund units or redemption amount in case of the investor's death.

• Nomination overrides will

Nomination supersedes the will of the investor. It means that even if the investor mentions a different person in their will, the nominee appointed for the mutual fund investments will receive the units or redemption amount.

Final Words

Mutual fund nomination is a simple yet crucial process that investors must be aware of. It helps ensure that the investments made by the investor are transferred to the intended person in case of their demise, avoiding any potential legal or financial issues for their family members. Investors must keep the nomination details up-to-date and review them periodically to ensure the intended person receives the mutual fund units or redemption amount. By understanding the importance of mutual fund nomination and following the steps outlined in this article, investors can ensure that their investments are utilised for the intended purpose and that their loved ones are financially secured in case of their untimely demise.