Invesco Mutual Fund

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Why Nomination is important in Mutual Fund investing

Life can be very unpredictable. In the unfortunate demise of the unit holder in a mutual fund scheme, the nomination (if registered) helps in transferring the units to the nominee. Let’s understand more about the nomination in mutual funds.

    1. Define nomination in the context of mutual fund investing?

      The process of appointing a person to take care of the assets in the event of the investor’s demise is called Nomination. The nominee can be any family member of the investor – spouse, child, a friend or any other trustworthy person. New folios/accounts opened by individuals with single holdings are now mandated to have nomination facility. Where there are joint holdings, with more than one holder, nomination is not mandatory. However, even in this case, financial planners always recommend that new folios should have a nominee..

    2. Is it possible to not appoint a nominee?

      The ultimate choice of having a nominee depends on the investor. In case, the investor decides against having one, all they need to do is sign on the requisite space in the form, indicating the same.

    3. What is the process of making a nomination?

      Nomination can be done by filling in the details of the nominee in the assigned column of the form. However, non-individuals like society, trust, corporate bodies, karta of Hindu undivided family (HUF), and holder of power of attorney are not allowed to nominate. Nomination is permitted for joint holders; however, the surviving holder becomes the beneficiary in the event of event of death of the other holders. The nominee becomes the beneficiary only in the case of death of all the holders.

    4. What is the maximum number of nominees that can be appointed?

      Up to 3 nominees can be appointed in one mutual fund folio. The percentage of amount that will go to each nominee in case of the unit holder’s demise can also be specified. Each nominee is eligible for an equal share if the percentage is not specified.

    5. Is there any benefit of appointing a nominee for MF investments?

      One of the biggest benefits of appointing a nomination is that it helps in smooth transfer of funds to the nominee(s) on the demise of the investor. Not having a nominee will increase the process of claim for the heirs/claimant as they may have to produce documents like a will, legal heir certificate, no-objection certificate etc. to get the units transferred in their name.

    6. Can a nominee be changed once registered?

      An investor can, as per his wish modify a nominee at any time.

      Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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