With growing awareness about securing one's financial future, the number of people investing in mutual funds has increased drastically over the last few years. However, when planning for your retirement, it is also important to plan on who will use your funds in case of your unexpected demise. By adding a nominee through a simple procedure, you can secure your family’s financial future.
Although adding a nominee was optional before, SEBI (Securities and Exchange Board of India) has made it mandatory to add a nominee or opt out of the nomination. The deadline for adding a nominee was 31 March 2022, which was extended by one year until 31 March 2023. However, in a recent circular, SEBI extended the deadline to 30 September 2023. In case investors fail to add a nominee before the deadline, SEBI will freeze your portfolio, and you won’t be able to invest or withdraw money from your funds.
What is a mutual fund nomination?
Mutual fund nomination is appointing a person to take charge of your investments after your death. Upon your unexpected demise, your investments will be transferred to your nominee. This process is also called the transmission of units.
Why is there a need to add a nominee for a mutual fund?
SEBI has made it mandatory to either add a nominee or opt out of a nomination for all investments, including shares and mutual funds. If you fail to do so, your portfolio will freeze, and you won't be able to invest or withdraw money from your funds. So, to make sure your investments do not freeze, you must either add a nominee or opt out of the nomination. However, adding a nominee is far more beneficial than opting out of the nomination. Below are some of the reasons why you must add a nominee.
- Smooth transfer of funds: If you add a nominee upon your demise, the nominee will get your investments without any hassle. However, if you fail to add a nominee, your beneficiaries will have to go through a long and expensive process to claim the funds.
- Reduces family feuds: When adding nominees, you can add up to three nominees and allocate a specific percentage of the portfolio to each of them. This reduces the family feud, and you were the one who decided the share for each of the nominees.
- Removes the hassle of producing any documents: If you do not add a nominee, your family members will be asked to produce a will, a no objection certificate, your death certificate, and other declarations to claim the mutual funds. Imagine a grieving family member going through all the hassle of producing different documents to claim the money. Adding a nominee can reduce the hassle for your family members.
- Live stress-free: By adding a nominee, you can live a stress-free life knowing your investments will go to the person of your choice.
Who can nominate, and who can be a nominee?
Although all kinds of investors invest in mutual funds, only a certain category of investors can nominate and be a nominee. The following four questions will give clarity on mutual fund nomination.
Who can nominate?
Only individuals holding their own units, either individually or jointly, can use the nomination facility.
Who cannot make a nomination?
A power of attorney (PoA) holder and a guardian investing on behalf of the minor cannot nominate. In the case of a minor, the guardian cannot make a nomination nor be a nominee for the minor's investments. After the minor attains the age of majority, he or she can choose their nominees.
Who can be a nominee?
All individuals can be nominees, including a minor, NRI, central government, state government, local authority, or religious or charitable trust. In the case of minors, the guardian's name and address must be provided by the person making the nomination.
Who cannot be nominated?
Any trust (apart from the religious and charitable trust), society, company, partnership firm, and Hindu undivided family (HUF) cannot be nominated for mutual funds.
How to nominate people to my mutual fund portfolio and demat account online?
Now that adding a nominee to your mutual funds is mandatory, you can add your nominee online. However, you need not visit the website of each and every mutual fund house. Instead, you can add nominees on Karvy (KFintech), CAMS, and MFCentral websites.
CAMS and Karvy are mutual fund transfer agents and provide backend services to mutual fund companies. Both CAMS and Karvy handle different asset management companies (AMCs). By logging on to their websites, you can easily update your nomination details for all your mutual funds.
Nominee updation with Karvy (KFintech)
To update your nominee with Karvy, you must follow the steps below.
- Click here to go to the Karvy nominee updation page.
- Enter your PAN number and select all folios.
- An OTP will be sent to your mobile and registered Email. Enter that OTP to complete verification.
- After verification, you will see the list of mutual funds you have invested, which Karvy manages. Select the funds and add the nominee details and verify it through OTP.
Nominee updation with CAMS
To update your nominee with CAMS, follow the steps below.
- Visit the CAMS nominee updation page and enter your PAN number.
- Select Email or mobile to receive OTP. Enter it to view all your mutual fund investments under CAMS.
- Then select all the funds for which you want to update nominee details and click on next.
- Then select register nominee and enter the nominee details.
- Click on proceed to add the nominee details and verify it with OTP.
- You can also update nominee details offline by filling out the nomination form and submitting it to Karvy and CAMS offices.
Nominee updation with MF Central
MF Central is India's first all in one investment management platform conceived by CAMS and KFintech to transform the mutual fund industry. The platform provides convenience to transact across all your mutual fund folios with unparalleled user experience.
The following steps will guide you to update your mutual fund nomination with MF central.
- Visit the MF central website and create an account using your PAN.
- Once you login you will see a list of all your mutual funds.
- Select the funds and update your nominee by providing all necessary details.
- Confirm it with OTP sent to your mobile or registered email address.
Along with mutual funds, SEBI has made it mandatory to add a nominee or opt out of nomination for demat and trading accounts. To add a nominee to your demat account, you must link your mobile number with your Aadhar. First, log in to your account and add nominee details. Then you must e-sign it with the Aadhar OTP. While this is a general procedure, different brokers have different procedures for updating nominee details. Let's look at the procedure to add nominees for some of the most popular brokers.
Adding nominee on Groww
To add nominees to your demat account with Groww, you must follow the steps below.
- Login to your account, then go to account details.
- Go to the add nominee page and fill in the nominee details.
- Finish it by e-signing with Aadhar OTP.
- You can add nominees only once online. In case you want to make changes or add more nominees, you must do it offline. Groww’s team can help you with it once you’ve raised a ticket.
Adding nominee on Zerodha
To add nominees to the Zerodha account, follow the steps below.
- Login to console.zerodha.com/dashboard and click on account.
- Then click on nominees and enter nominee details. You can add up to three nominees.
- Next, upload the nominee ID proof and allocate the share by entering the percentage against each nominee.
- Proceed to e-sign and request for OTP.
- Once you get the OTP, enter it to verify your identity.
- The nominee will be added within 72 hours, and an email notification will be sent once the procedure is done.
- In case the mobile number is not linked to Aadhar, follow the offline procedure.
Adding nominee on UpStox
To add a nominee to your UpStox demat account, follow the steps given below.
- Login to your Upstox account and click on my account.
- Then select ‘My nominees’ and click on add nominee.
- Fill in the nominee details and allocate the share to each of the nominees.
- Then click on continue to e-sign the form.
- Enter the OTP sent to you, and your nominee details will be updated in 72 hours.
Adding nominee in HDFC
To add a nominee to your HDFC securities account, you must follow the steps below.
- Go to the HDFC nomination page.
- Login to your HDFC securities account.
- Add nominees by entering all necessary details. You can add up to three nominees.
- Then confirm all the details and e-sign with OTP.
Adding nominee in ICICI Direct
Following are the steps to add nominee details for your ICICI account.
- Login to your ICICI direct account.
- If you haven't added a nominee, you will see a pop-up on your screen asking you to add a nominee or opt out of the nomination.
- Click on the 'Add Nominee;' button and enter the nominee details.
- You must enter the nominee’s name, date of birth, percentage allocation, and relationship with the nominee.
- Click on submit to complete adding your nominee.
- If you do not see a pop-up, go to the 'Personal Details' tab from settings, scroll down to 'Trading Nominee', and click 'Add Nominee'. Add the nominee details and click on submit.
- You can also add the nominee offline by submitting an application form at any ICICI Bank or ICICI Direct branch.
Implications of not adding a nominee
If you do not add a nominee before the deadline of 30 September 2023, your account will freeze. You will not be able to invest or redeem funds.
In case you opt out of the nomination, you can access your mutual fund portfolio. However, in case of your demise, your beneficiaries or legal heir will have to go through a long tiring procedure to claim your investments.
They have to submit the following documents to claim the investments.
- A letter to the fund house requesting transmission of units.
- Original or attested photocopy of the death certificate of the deceased investor.
- Verified KYC of the claimants.
- A cancelled cheque or attestation from the claimant's bank manager or bank account statement.
- A bank mandate on the bank's letterhead or a with the bank's seal.
- Foreign Account Tax Compliance Act (FATCA) self-certification document.
- An indemnity bond signed by all legal hires.
- A copy of the notarized will or succession certificate by a competent court.
Collecting all these documents can be a hassle. Hence it is better to add a nominee and save your family members from all stress they might have to go through later to claim your investments.
Frequently Asked Questions
What is the maximum number of nominees I can add to mutual funds?
You can nominate up to three persons for your mutual funds.
Can nominations be done online for mutual funds?
What happens if I don’t add nominees?
If you do not add a nominee before the deadline of 30 September 2023, your account will freeze. You will not be able to invest or redeem your investments. In case you opt out of the nomination, you can access your mutual fund portfolio. But, in case of your demise, your beneficiaries or legal heir will have to go through a long tiring procedure to claim your investments.
In this article