How to Nominate Bank Account, Mutual Funds?: Every time an individual fills up a form for an investment, whether it is a mutual fund, shares, fixed deposit, or bank account, there is a separate section to mention a nominee. The nominee is only the custodian of the investment until the legal heir claims them legally. It means that the process of nomination enables the appointed person to take care of one’s investments when he/she dies refers to the nomination. All financial institutions and banks of India have standard processes for settling death claims, where the nomination is specified clearly in the folio or account. Learn more about how to nominate, cancel or change the process of nomination in a bank account and mutual funds.
What Exactly Is the Nomination Process?
The nomination facility permits an investor in a mutual fund or a deposit account holder to nominate an individual who can claim the investment of the safe deposit locker or the earnings of the deposit account. The nominee can be anyone a person considers to be the first relative- spouse, parents, siblings, children, or other. Before nominating anyone, an individual must be familiar to:
- Start of Investment: There is a separate column in an application form. So, a person should appoint the nominee while opening an account or during investment.
- Multiple Nominees: Some investments like mutual funds enables a person to have multiple nominees where he/she can assign money percentage to each of them.
- Minor Nominee: If the guardian is mentioned in the form, then a minor can be a nominee.
- Nominee Change: One can change the nominee assigned at any time or multiple times without even notifying the earlier nominee about the change.
- Cancellation of Nomination: One has the right to cancel the nomination at any time without even informing the individual nominated.
How To Make Nomination in Savings Bank Account?
Nomination is the right of the bank account holder to appoint one or more persons who will be allowed to receive money upon the account holder’s death. While opening the saving account in any Indian bank, an individual can apply for nomination. The opening form of every bank account has a different section for nomination.
- Appoint the Nominee: One should fill the nomination form DA-1 to appoint a nominee for any saving account. A person can appoint a nominee while opening an account or later. If an individual did not nominate anyone during the account’s opening and wants to nominate in the future, then he/she has to visit the bank. From the bank, they will get the DA-1 nomination form. An individual should fill the form and then submit it to the bank.
- Changing the Nominee: In case, if anyone wants to change the nominee made already, he/she has to fill the DA-3 form. One can download the DA-3 form from the official website of the bank or can obtain it by visiting the bank. The form involves the signature of two witnesses. After filling the form, one needs to submit it to the bank.
- Nomination Cancelling: An individual has to fill the form DA-2 to cancel the nomination made already. One can get the DA-2 form from the bank or can download it from the website of the bank. The form that involves two witnesses’ signatures should get submitted to the bank once filled completely.
Making A Nomination In a Bank Account
Some points to remember while making a nomination in a bank account:
- The facility of nomination is available for accounts opened as single or joint accounts. It is not accessible for a representative account. It is vital to note that the nomination forms either for opening, change, or cancellation should get filled up by all joint holders.
- The account holder can add a new nominee during their lifetime. DA-1 form allows the account holder to make a nomination if he/she has not made it yet. This form requires the details of the account holder and the nominee’s information.
- A nominee is eligible to receive the funds on the death of the account holder. In the case of joint accounts, a nominee will obtain the funds on the death of all account holders.
How to Make Nominations in Mutual Fund Investments?
Securities and Exchange Board of India (SEBI) revised its Mutual Funds Regulations in 2002. The regulations amended permit the nomination option to the unitholders of mutual funds. Since that time, Asset Management Company (AMC) offers a facility to the unitholder to choose a nominee in whom the units held by an individual shall vest if he/she dies. However, nomination asset does mean that nominee acquire title or any beneficial interest in the mutual fund.
- Only those individuals can make nomination who are holding or applying for units on their own behalf.
- If the unitholder is choosing a minor as a nominee, then he/she must provide the name and address of the minor nominee’s guardian.
- Nomination is compulsory and since April 2011, different investors are applying in solo holding.
- A non-resident Indian can become a nominee in regard to the force exchange controls from time to time.
- Non-individuals such as trust, partnership firm, society, body, holder of Power of Attorney, corporate, and, Karta of Hindu Undivided Family can neither become a nominee nor can nominate.
- When an individual is a nominee, KYC requirements are not necessary during that time. However, due to the death of the unitholder, when a nominee steps into the shoes of a unitholder, then he/she has to complete the KYC necessities. If the nominee is still a minor at that time, then the guardian should be KYC compliant.
- The process of nomination is at the folio level. If an investor has various schemes in a folio, then all units get transferred to the nominee. The nomination becomes valid to the new units also if an investor makes more investment in the same folio.
- One can select the multiple nominees for mutual funds with a percentage to be allocated to each individual mentioned. In case, if the percentage is less than 100% and there are multiple nominations, then the balance gets rebalanced to the first unit holder. However, if the percentage is more than 100%, then nomination gets forbidden.
- The unit transfer in courtesy of a nominee would be legal discharge as per the asset management company against the legal beneficiary.
- Individuals who hold units on their own behalf or made the original nomination hold a right to cancel the nomination. On the cancellation, the nomination should get considered as canceled. The Asset Management Company should not be any compulsion to transfer the units in the nominee’s favor. Generally, it takes 7 working days from the receipt date of filled forms in the process of change or cancellation of nomination.
Can One Make Nomination Later After Filling the Form?
While filing the form, if someone forgets to appoint a nominee, then they can do it later by filling the form for the Asset Management Company. The investor can request the registrar or transfer agent for the form or can download it from the websites of mutual funds.
Benefits of Nomination Registration
With the registration of nomination, the process of funds transferring becomes trouble-free to the nominee or nominees in the event of the investor’s demise. However, if no nomination is made, the claimant/ heir has to create different documents like a legal heir certificate, a will, or a no-objection certificate from other legal heirs to get the units transferred. Thus, a nomination facility is an efficient way to lessen the hardships of the legal heirs in claim settlement.
Nomination is not mandatory; however, it is advisable to nominate a person in a saving bank account or mutual fund investment. It simplifies the process of claim settlement and gives a nominee right of legal heirs of the investor. One can nominate anyone- an acquaintance, a friend, or a relative.