Mutual Fund Nomination: How to Add Nominee in Mutual Funds?

Nomination is one of the most overlooked aspects of mutual fund investments. Many investors don’t take the effort to add a nominee in mutual funds either at the time of investment or later. However, doing so can often lead to significant legal implications and complexities in the future. If you’re planning to invest in a mutual fund or already have mutual fund investments, here’s why you should assign an MF nominee without fail.  

What Is Nomination in Mutual Funds? 

Mutual fund nomination is the process through which you assign an individual as a nominee to your mutual fund investment. In the case of your demise, the nominee can claim your mutual fund units by filing an application for transmission with the Asset Management Company (AMC). 

Also Read More About What is Mutual Fund?

Why Is Mutual Fund Nomination Important?

Filing nomination in mutual funds is an essential step that every investor must take. There are several reasons why you should add a nominee to mutual funds. Here’s a quick overview of some of them. 

• Clarity in Asset Distribution

Assigning a nominee to your mutual fund investment provides the fund house with clarity on who the intended beneficiary is. In the case of multiple nominees, you can even specify the percentage of the investment that they’re entitled to in the case of your demise. This helps avoid disputes and ensures fair distribution in line with your wishes. 

• Faster Transfers 

Nomination in mutual funds ensures faster transmission and claim settlement process. All that the nominee needs to do is file a transmission application with the mutual fund house along with all the necessary documentation. The entire claim settlement process and subsequent transfer of mutual fund units will be completed within days of filing the application.  

• Avoidance of Legal Complications

Without proper nomination in mutual funds, your beneficiaries will have to go through an unnecessarily long and arduous legal process, which may delay the distribution of your assets indefinitely. 

For instance, if you’ve left behind a will, your beneficiaries will be required to get a probate of the will by making an application to a court. On the other hand, if you don’t have a will (intestate), your beneficiaries will need to apply for a succession certificate by making an application to a competent court. The process of getting a probate of a will or a succession certificate may take anywhere from a few months to maybe even a few years. Moreover, your beneficiaries will be forced to incur additional expenses in the form of legal costs and court fees. 

Fortunately, you can avoid all of this by simply assigning an MF nominee to your mutual fund investments. 

How To Add a Nominee in Mutual Funds Online?

Now that you’ve seen just how important nomination in mutual funds is, let’s look at the online process you need to follow to add a nominee to mutual funds. 

Updating Nominations in Mutual Funds through MFCentral 

MFCentral is a centralised platform conceived by two of the largest Registrar and Transfer Agents (RTAs) in India – CAMS and KFintech. If any of your mutual funds have either of these two as RTAs, here are the steps you need to follow to assign an MF nominee. 

• Step 1: Visit the website of MFCentral and sign up for an account using your PAN and mobile number or email. 
• Step 2: Once your account is created, sign in using your user credentials. 
• Step 3: On the dashboard, click on ‘Submit Service Requests’. 
• Step 4: Click on ‘Update Nominee Details’. 
• Step 5: Select the folios for which you would like to update the MF nominee. 
• Step 6: Enter all the details of the nominee and submit the request. 

Note: It may take a few days for the nominee update request to get processed. 

Updating Nominations in Mutual Funds through MF Utilities 

If your mutual fund’s RTA is neither CAMS nor KFintech, you can use the MF Utilities portal to update your MF nominee. However, before you proceed, make sure to check if the AMC of your mutual fund is on the list of participating mutual funds. Here are the steps you need to follow.

• Step 1: Visit the website of MF Utilities and click on eCAN registration to create an account for yourself. 
• Step 2: Enter your mobile number or email ID and click on ‘New Form’.
• Step 3: Choose your account type, holding nature, investor category, tax status and the number of holders and click ‘Next’.
• Step 4: Enter your basic details like your name, date of birth, PAN, mobile number, email ID, income details and FATCA details and click ‘Next’.  
• Step 5: Enter details of your bank account such as your bank account number, account type, name of the bank, MICR and IFSC of your branch and your choice of bank account proof.
• Step 6: Click ‘Next’ and select the ‘Yes – I/We wish to nominate’ option and proceed to enter the details of your MF nominee(s). Choose the nominee verification type as ‘Nominee 2FA’ and proceed. 
• Step 7: Upload scanned copies of all the documentary proof and click on ‘Submit for eCAN’. 

That’s it. Your request for the creation of a new eCAN will be submitted along with the update of your MF nominee. 

How To Add a Nominee in Mutual Funds Offline?  

If you’re not comfortable with updating your mutual fund nomination online, you can choose to do it offline as well. All you need to do is fill out and submit the nomination form along with the necessary supporting documents (if needed) to the Asset Management Company (AMC) in charge of your mutual fund. You can either send the duly filled out nomination form and the documents to the AMC by mail or submit it directly at any of the AMC’s branch offices near you. 

Note: You can download the nomination form from the AMC’s official website or get a physical form from any of their branch offices. 

Things You Need To Know When Making a Mutual Fund Nomination 

Now, before you proceed to add a nominee to your mutual fund investments, here are a few things you need to know. 

• Although it is highly recommended, nominating an individual for your mutual fund investments is optional. You can also choose to not nominate anyone. 
• According to a circular published by the Securities and Exchange Board of India (SEBI) on June 15, 2022, all investors must choose to either opt in or opt out of nomination for all of their mutual fund investments on or before June 30, 2024. Failure to choose either of these two options will lead to the mutual fund folios being frozen. 
• You can change the nominee of your mutual fund investments at any point in time by filling out and submitting a new nomination form. 
• You can assign multiple nominees to a mutual fund along with the share (in percentage) each of them is entitled to.

Conclusion

Although the process is simple, many mutual fund investors still choose to opt out of assigning an MF nominee. It is an essential step that can ensure that your mutual fund investments are transferred to your intended beneficiaries in the case of your demise without subjecting them to unnecessary delays and legal complications. If you’re planning to invest in a mutual fund, it is advisable to assign a nominee at the time of investment itself. On the other hand, if you’ve already invested, update your nominee details by June 30, 2024, to avoid an account freeze. 

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