Financial investments are often planned around life goals — you could be investing to fund your children’s education, for retirement, or to meet other short-term goals like buying a home, etc. They are also made to secure your loved ones, in case something were to happen to you. But, very often primary caregivers end up not informing other family members about the investments they make. In our new video series ‘Money Shots’, Neil Borate, Deputy Editor at Mint explains why adding nominees to investments is key, and how to go about it.
It may be a good idea to list down all your investments in one place and let a close family member know about them. But be sure to update this file at regular intervals with any corrections that you may make to your portfolio. This will ensure the financial wellbeing of your family in the event of your demise.
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Read on to know what a nomination is, why it is important, and how you can add a nominee to your mutual fund investment in case you haven’t already done so.
What is a nomination?
Each time you fill out a form to sign up for an investment, you are prompted to add nominee details. Nomination is the process of appointing a person to take care of your assets in case something were to happen to you. The nominee can be anyone — your spouse, child, sibling, or any other person who you trust with your assets. Remember, the nominee that you choose is only a custodian of your money. They do not get to inherit your investments. Their role is to fairly distribute your wealth among your legal heirs — they are allowed a share of your assets only if they are legal heirs.
You can choose up to a maximum of three nominees for every mutual fund investment that you make. While the process is not mandatory when you are signing up for a mutual fund, it is highly recommended by financial experts. The good thing is that once a nomination is done, it holds until the investment is live or until you make a request to change the nominee.
What happens if I don’t have a nominee?
Market regulator Securities and Exchange Board of India (SEBI) has mandated that every investor must fill out details for nomination at the earliest possible time. But, in case you cannot do so at the time of completing the initial paperwork when you make the investment, you need to take the decision by June 30. If you don’t do it by the deadline, your account will get frozen unless you declare that you have opted out of the nomination process.
Remember that if you don’t have a nominee for your mutual fund investment, the transfer of your assets in the event of death will become a long-drawn process. In certain cases, it has also been seen that the family does not even know about the investments. It may be a good idea to create a list of all your investments in a notebook or a digital file and tell your family about it.
In the event that you have not added nominee details, financial institutions can reach out to nominees if your assets remain unclaimed for a long time. It means sharing nominee details along with their contact numbers will ensure hassle-free transfer of investments to your legal heirs.
How can I add a nominee?
There are different ways to do this. You can approach your asset management company or the mutual fund house where you have your MF scheme running. Simply download the nomination form from their website and get it printed. Fill it up, scan it, and send it to the fund house via email. Some fund houses will ask you to visit the office physically to submit the form.
You can also add a nominee using a Registrar and Transfer Agent (RTA). For this, you can opt for CAMS or KFintech. You need to open the portal and go to the ‘service requests’ feature. Once you click on it, look for the ‘nomination’ tab. The nomination page will ask you to provide your PAN number. After that, you will receive an OTP on your registered mobile number and email ID. Enter the OTP and it will open the nominee form. You can add up to three nominees along with their nomination share. Providing your nominee’s name and age, along with your relationship with him or her, is important. You can also add their PAN, contact number, and address, but this is not mandatory. Alternatively, you can also update nominee details on the MFCentral website. The process is the same as CAMS and KFintech.
Add your nominee today
So, if you have invested in mutual funds this year and have not filled out nominee details, you must declare the nominee name or seek exemption from nomination by June 30 this year, which is the SEBI mandated deadline for nomination. Adding a nominee to the investment will save a lot of hassle for your loved ones in case something happens to you.
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Published: 27 May 2024, 09:57 AM IST