How to Add Nominee to Mutual Funds

How to Add Nominee to Mutual Funds? Nominations are a very important part of any type of investment. When you make any investment, you need to nominate some of your relatives who should benefit in case of any casualties with you. Nominating a person to receive a mutual fund investment in the event of an investor’s death is known as a mutual fund nomination. The nominee can claim the money without any issues. The procedure is very important because it guarantees that the amount invested in a mutual fund is secured. 

Read: How to Withdraw Mutual Funds Before The Locking Period

But the person(s) named in the must take precedence over the nominee as described in mutual fund investments if the investor has also created a formal will or other estate management instrument. An individual unit holder has the option to name a beneficiary who will be entitled to the unit holder’s investment or the profits of his redemption in the event of his death.

If multiple people are holding the units jointly, they must all agree to name a person to whom the rights to the units would pass if all joint unit holders passed away.

The Latest Rules Regarding Nominations

Mutual funds give individual unit holders the option to designate in the manner outlined in the Fourth Schedule by SEBI Mutual Funds Regulations, 1996, Regulation 29 A.

There have been efforts to encourage investors to designate someone in their mutual fund holdings for years. Now the Securities and Exchange Board of India (SEBI), which regulates the capital markets, has made it mandatory for MF investors to either nominate someone or choose not to nominate anyone, which gave the campaign a significant boost. On October 1, 2022, the regulation became effective for fresh folios.

To allow unitholders to execute their preferred option, SEBI has ordered the Asset Management Companies (AMCs) to offer both an online and offline facility. Owners of mutual fund units may notify fund houses, registrars, or transfer agents of their nomination or decision to opt out by submitting it in the prescribed format by the deadline indicated for doing so. 

Unitholders who choose to execute their option online may use the e-Sign option or share a scanned copy of the properly completed and signed applicable form with the aforementioned alternatives.

Why is Nomination Required?

The nomination process in mutual funds is of much importance. In case the investor of a mutual fund passes away suddenly, the nomination is very helpful for receiving the benefit of investment. Mutual funds have had this capability for many years. There has always been a column for nominating candidates on application forms. To ensure a smooth transfer of assets after their passing, intelligent and wise investors have started nominating their loved ones. The same is true with mutual funds. 

Additionally, for folios held in single names, nomination was required. For existing folios, including those that are jointly held, SEBI has made it essential to nominate someone or to opt out of nomination. Existing folio investors’ investments will get frozen, and they won’t be able to make any transactions in them if they don’t follow this rule. 

March 31st, 2023, was the cut-off date. Only after registering your nomination or choosing ‘not to, which means no nominee is required, is a new folio generated.

For investing in a mutual fund, the nomination is essential because:

1. In case the investor passes away, it avoids protracted legal proceedings.
2. Helps in delivering the investment to the nominee without delay and in a smooth manner.
3. It does not let anyone else receive the investment; it makes sure it goes to the original and right recipient.

Who is Eligible to Submit as a Nominee?

Who is eligible to serve as a nominee for mutual fund units? This is clearly stated in the SEBI guidelines. Anybody, including a juvenile who may or may not be a family member or legal heir, may be a candidate for nomination. If the candidate is a minor, information on the name and address of his legal guardian must be included. 

By the rules of the current exchange control, an NRI may also serve as a nominee. The Central Government, State Government, or municipal government may also be suggested by an individual.

How to Add Nominee to Mutual Funds

Steps to Add a Nominee on Groww

• Go to Account Details after logging in to your account.
• Enter the nominee’s information on the Add Nominee page.
• Finish it off by e-signing it with your Aadhar OTP.
• Nominees can be added only once online.
• If you need to make any changes again, you can do it offline.

Steps to Add Nominees in Zerodha

• Log in and select Account from the console.zerodha.com/dashboard menu.
• Then enter nomination information by clicking on ‘nominees’.
• A maximum of three nominations may be added.
• Then upload the nominee’s ID evidence details.
• Then assign the share by entering a percentage for each nominee.
• Go ahead and e-sign.
• Then requesting an OTP.
• Enter the OTP to confirm your identity after receiving it.
• A notification email will be issued after the process is complete.
• Wait 72 hours; the nominee will be added within 72 hours.
• If the mobile number isn’t associated with Aadhar, do the offline process.

Adding a Nominee to UpStox

• Click on “My Account” after signing into your Upstox account.
• Next, choose “My Nominees” and press “Add Nominee.”
• Fill out all the detailed information about the nominee.
• Assign the share to each nominee after filling out their information.
• To electronically sign the form, click Continue.
• You will receive an OTP at your email address.
• Enter that OTP.
• Your nominee’s data will be updated 72 hours after you enter the OTP.

Steps to Add a Nominee to ICICI

• Enter your ICICI Direct login information.
• You will get a pop-up asking you to add a nominee or opt out of the nomination if you haven’t already added one.
• Enter the nominee’s information by clicking the “Add Nominee” button.
• The candidate’s name, birthdate, percentage allocation, and relationship to the nomination must all be included.
• To complete adding your nominee, click Submit.
• Go to the “Personal Details” page under preferences, scroll down to “Trading Nominee,” and click “Add Nominee” if you do not get a pop-up.
• Enter the nominee’s information and press “Submit.”
• By completing an application at any ICICI Bank or ICICI Direct branch, you can even add the nominee offline.

Conclusion

Mutual fund units can only be transferred from one unitholder to another via the nomination feature of the mutual fund, never by way of redemption. If a mutual fund holder wants to pass on their assets through inheritance, they must name nominees. 

The option to opt out of nomination was not available to investors in mutual fund units in the past, nevertheless. They now have this option thanks to the new amendment, but to avoid any issues with their folios needing to be unfrozen after the time set by SEBI, unit holders must make their choice before the deadline. I hope you like the post How to Add Nominee to Mutual Funds please do share with others.