Mutual Fund Nomination: All You Need to Know

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Mutual Funds Nomination: What is it & Why is it necessary?

In investments, nomination is one of the most important things that every investor should do. It enables the smooth transfer of the ownership of an investment and all the benefits that come with it to someone you want in case you won’t be there. Death is always unfortunate but the pain gets aggravated when your close ones have to suffer from it, more than they need to. Nomination can help them to manage finances efficiently and without any helplessness in your absence or when there is no caretaker. 

Fulfilling your nomination duties is not something that demands any sort of effort from you. Thanks to the internet and advancements in technology, we all can now do nominations right at our fingertips and in the comfort of our homes. Here we will talk about nomination in mutual funds, how SEBI has regularized it further, and how you can do it yourself.

SEBI Regularization of Nomination in Mutual Funds

The apex governing body of the Indian securities market SEBI has standardized nomination in mutual funds. It has instructed all fund houses or AMCs to give their investors the option to fill their nominee for mutual fund investments or submit a request to opt out from nomination. This will be applicable to all investors putting their money in mutual funds from August 1, 2022. SEBI has also specified the format both for furnishing nomination and to opt out of it. Here are the key highlights of SEBI’s new rules on mutual fund nomination:

  • All mutual fund investments made from August 1, 2022, will either have to come up with a nomination or a clear request of opting out from nomination. This has to be ensured by all fund houses for all the investors.
  • SEBI has prescribed the format to furnish nomination and also how to opt out of it. The market regulator has explicitly instructed fund houses to furnish their investors with both online and offline ways to submit the nomination details and declare their desire to opt out from nomination at all.
  • All mutual fund investments made, by an individual, either singly or jointly, should have a nominee or opting-out declaration. The same has to be done by March 31, 2023, failing which, the investor’s folio will get frozen and he/she won’t be able to redeem units.

It’s not only about SEBI notification to the fund houses, furnishing nomination is more than just completing a formality. Here are the most important reasons why you should furnish nomination details in mutual funds.

You Select a Legal Heir of Your Investments

Most people make investments not only for themselves but also for their children, or family to be more precise. The investments you have made by earning from your sweat and blood are precious and help to protect your dear ones financially. Hence, there should be a way that your wealth should get transferred in the name of one of your close ones in case of your unfortunate death. 

Helps to Protect Your Family Financially

No amount of money can compensate for your loss to your family members and all others to whom you are dear. It will hurt most those who apart from being emotionally attached, were also financially dependent on you. If you are anyhow investing to protect your family financially, then what’s wrong with taking a few minutes from your life to furnish a nomination? The money that your family will have after your loss will help them lead a respectful life independently.

Will Save Your From Hassles

After SEBI’s new rules for mutual fund nomination, it has become no less than compulsory to fill in the nomination details or to opt for nomination at all. As per the recent notification, if you fail to do so by March 31, 2023, your mutual fund investments will freeze and you won’t be able to sell the owned units. 

How to Furnish Nomination in Mutual Funds?

Nomination can be done either during the initial application for the purchase of fund units or anytime after that.

  • While filling out the application form, check out the Nominee section. You can put up to three names there and have to allocate a percentage to each of the nominees in your total capital. The total sum should come out to be 100%.
  • Most platforms now offer an easy and completely hassle-free way to submit nomination details even if you have already submitted the application. 
  • Furthermore, with SEBI’s new rules, the mutual fund nomination process will get standardized and now fund houses themselves will furnish you the required information and format to submit the nomination details.

Some Common FAQs

Who can fill the nomination?

Only individuals who have mutual fund investments either singly or jointly, can fill the nomination.

Who can we nominate?

Anyone can be made a nominee for your mutual fund investments, even a minor. The nominee needs to be a family member. However, in case the nominee is a minor, his/her legal guardian details (like name and address) should be provided in the nomination form.

Is it compulsory to provide a nominee in my mutual fund?

Earlier it was mandatory to have atleast one nominee for your mutual fund investments. However, with SEBI’s recent nomination, you can also opt out from nomination, i.e; choose not to assign any nominee at all.

How many nominees can I have for my mutual fund?

You can have upto three nominees for your mutual fund investments. You can also specify what percentage of the total wealth each nominee can have.

Can I change the nominee?

Yes, you can change nominees anytime you want. You can also modify the allotment of shares specified to each of the nominees.