How to add or change a nominee in your mutual fund portfolio

Passing on our wealth to the right person as smoothly as possible is very important. Else, it gets troublesome for our legal heirs to get our assets in their names; the legal process can get lengthy and tiresome. So, having a nominee for your investments helps.

Assigning a nominee to mutual fund folios ensures smooth transmission of assets after the death of investor. Many times investors forget to add the nominee details or just avoid it to save a few seconds while filling up the investment form. But having a nominee is important.

Why is nomination important?

Nomination is a process where you assign your trusted family members or friends to take charge of your assets after you pass on. Nomination doesn’t mean bequeathing your assets to that person. It just means you are entrusting your assets to someone who would be in charge of making sure that your money gets passed on to the right person.

Should I nominate someone or hold joint accounts instead?

For smooth transfers after you’ve passed on, it is always desirable to have a second, and preferably a third, holder. Joint holders (ideally held in an ‘anyone-or-survivor’ mode) are co-owners of your fund. A nominee is merely a trustee of your investments. She is not the heir to your mutual fund asset; her job is to ensure that the legal heir gets the money. If you invest in a new mutual fund folio as a single holder, nomination is compulsory.

Unfortunately, many of us invest singly, without joint account holders. While filling the physical investment application, we cannot obtain signatures of our family members if we are staying in different cities. While investing online, in many cases, the joint holder’s details may not be available on hand or there may be reluctance to key-in the details.

Here’s where nomination helps. It ensures that our portfolios don’t get orphaned after we’re gone. Besides, you do not need signatures to enrol a nominee. It’s easy.

Who can be your nominee?

Stick to people you trust. They can be your siblings, your close family members, your friends or associates. You can also nominate local authorities or a charitable or religious trust.

Nomination can be done for an entire folio and not for specific schemes. You can appoint up to three nominees for each folio. But you can assign a percentage of your assets (in that folio) to each of your nominees. If you fail to specify percentage share for each one of them, then the proceeds are shared equally among nominees.

My child is a minor. Can I appoint a minor as a nominee?

You can appoint your child as your nominee, provided you mention her date of birth and also appoint a guardian. You have to clearly specify the name of the guardian and his address in the nomination form, failing which such a nomination is considered invalid.

But if you invest in your child’s name, then you cannot appoint a nominee.

Can you change your nominees later in an existing folio?

Yes, you can modify, and do so as many times as you want. There is a form that you need to fill. You can either replace multiple nominees or just a single nominee from your existing list. In the case of multiple ‘joint’ holders in the folio, all investors need to sign the nomination change form. You can get these forms from the website of your mutual fund or with its registrar & transfer agent’s portal.

Some fund houses also allow appointing a nominee by logging into their websites. Online change of nomination is allowed for single and ‘either of survivor’ mode of holding in mutual fund folios.