Transmission of Mutual Funds: Lost a Loved One? Here Is the Process to Claim Their Units
Coping with the emotional and financial pain of losing a loved one can be difficult. While you are overcoming the emotional pain, you have to deal with the deceased person's financial matters also at the same time.
It involves approaching the financial institutions and getting the assets transferred to the beneficiaries. In this article, we will discuss the process of transmission of mutual fund units in the event of the investor's demise.
What Is Transmission of Mutual Funds?
Transmission of mutual funds is the process of transferring a deceased person's mutual fund units to the nominee(s) or the legal heirs. SEBI and AMFI have laid down the process to claim the units.
The nominee can approach the AMC with the required documents and submit a transmission request. If there is no nominee, the legal heirs can submit the transmission request. However, if there is no nominee, additional documents are required, and the process can be cumbersome and time-consuming.
Transmission Process
Let us now look at the various scenarios and the transmission process in case of each of them.
Here Are Links of Transmission Form for Mutual Fund -
1) Death of the Second/Third Unit Holder(s) in a Joint Account
Suppose the second and/or third unit holder dies. In this case, the surviving holder(s) will have to submit the mutual fund transmission form T1 requesting for the deletion of the name of the deceased second and/or third holder. Along with the duly filled Form T1, the death certificate of the deceased unit holder(s) and other documents must be submitted to the AMC.
On verifying all the required documents, the name(s) of the deceased second and/or third unit holder(s) will be deleted. After the deceased holder's name deletion, the first holder and surviving holder (if any) can continue holding the mutual fund units in their name.
A copy of Form T1 can be downloaded from the AMFI website from the following link:
Form T1 - for Deletion of Name of the deceased 2nd or 3rd Jt. Holder
2) Death of the First Holder in a Joint Account
In the event of the death of the first holder, the surviving unit holder(s) have to submit Form T2 for transmission of units in their name. The death certificate of the deceased holder has to be submitted. The new first unitholder has to submit a cancelled cheque (with the holder's name printed) or a copy of the passbook or bank statement (not more than three months old).
On verifying all the required documents, the AMC will process the transmission of units in the name of the surviving unit holder(s).
A copy of Form T2 can be downloaded from the AMFI website from the following link:
Form T2 - for Transmission of Units - Where the 1st holder is Deceased
3) Death of Sole Unit Holder or All Unit Holders in a Joint Account
Suppose the sole unit holder in a mutual fund account or all the unit holders in a joint mutual fund account die. In this case, the nominee(s) has to submit Form T3 for transmission of units in their name. The nominee must submit the death certificate of the deceased unit holder(s), the duly filled form, and other documents.
If the value of the transmission amount is up to Rs. 5 lakhs, the nominee’s signature must be attested by a Bank Manager in the prescribed format. If the value of the transmission amount is above Rs. 5 lakhs, the nominee’s signature must be attested by a Notary Public or a Judicial Magistrate First Class (JMC).
On verifying all the required documents, the AMC will process the transmission of units in favour of the nominee(s).
A copy of Form T3 can be downloaded from the AMFI website from the following link:
Form T3 Transmission Request Form for Nominee & Legal Heir
4) Death of Sole Unit Holder or All Unit Holders in a Joint Account With No Nominee
In the above section, we saw how the nominee(s) can claim the units on the death of the unit holder(s). However, what if there is no nominee(s)? In this case, the legal heirs, as per the succession laws, can make the claim. The claimant(s) has to submit duly filled Form T3, the death certificate of the deceased unit holder(s), and other documents.
The claimant has to submit documents evidencing their relationship with the deceased unitholder(s) and other documents as required for the transmission purpose.
Without nomination, the list of documents required is long, and the process is cumbersome and time-consuming. Hence, it is always recommended to appoint nominee(s) for all your assets.
Who Has the Right to the Units of the Deceased Person?
Please note that the nominee is only the caretaker or custodian of the deceased person’s assets. The beneficiaries will be the person(s) mentioned in the will (if there is one) or the legal heirs as per the succession laws.
Important points to keep in mind
1) Death Certificate
To claim the deceased person's assets from all financial institutions, you will have to submit a copy of the death certificate to each institution. So, make sure you make multiple copies of the death certificate and get them attested.
2) Multiple Nominees
In case there are multiple nominees, and the share of each nominee is not defined, the AMC will distribute the money equally to the nominees at the time of transmission. There can be a maximum of three nominees.
3) Distribution Among Legal Heirs
If there is no will, the money will be distributed equally among the legal heirs, as per the succession law.
4) Timeline for Transmission of Units
Once a transmission request is submitted along with all the required documents, the transmission of units of mutual funds may take up to 10 days.
5) Tax Implications of Transmission
At the time of transmission of mutual fund units to the claimant, capital does not arise. Hence, there is no capital gains tax. In future, whenever the claimant redeems the mutual fund units, they will have to pay capital gains tax.
For capital gains tax calculation, the holding period will be considered from the original date of purchase (by the deceased holder) and not the transmission date. Similarly, the purchase cost will be that of the deceased holder and the cost at the time of transmission.
Make the Transmission Process Smooth for Your Claimant(s)
In this article, we have explained the various scenarios that may arise during the transmission of mutual fund units of a deceased person. Now that you understand the entire process, you should take steps to make the process easy for your claimant(s) after your passing away.
The first step is to appoint a nominee(s) for all your assets, including mutual fund units. The next step is to make a will and mention the details of how you want your assets to be distributed after your demise. The final step is to explain the transmission process to the nominee(s) and the will beneficiaries.
The above steps will make it easy for the claimants to get your mutual fund units transferred to them after your passing away. They will be able to enjoy the benefits of your assets, making your efforts in accumulating them worth it!
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