BackDid you know: to nominate or have a joint account holder?
Joint holding makes passing on to inheritor easier
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Although you invest in mutual funds (MFs) for your own benefit, it’s always a good idea to plan your succession. Maybe you and your spouse, or you and your parent want to invest jointly. There are two ways to do this—as joint account holders or through nomination.
What are these?
In a “joint account" or “anyone or survivor" mode, you can add another person’s name, straightaway. This also makes them joint owners. In the “joint account" mode, every action you take on your portfolio requires all account holders’ signatures. But if you put their names as “anyone or survivor", you can make switches or redemptions or other actions such as changing bank mandates without their signatures.
Under nomination, investors merely nominate someone; if the primary holder dies, the nominee can inherit the investments. According to capital markets regulator Securities and Exchange Board of India’s (Sebi) norms, you can include up to three nominees.
How does it work?
The joint account holders are part-owners of your investments. But the nominee is merely a trustee to your investment. In the order of hierarchy, if the primary holder dies, the joint account holder—specifically the second account holder—becomes the owner of the investment. A nominee gets the money only when all joint account holders die.
Transmission—transfer of units in case the primary holder dies—to the surviving unit holders (who are next in line) or the nominee (if there’s no joint holder) requires the same set of documents: a covering letter, death certificate of the deceased unit holder, know-your-client (KYC) of the claimant and the new bank mandate details of the claimant. Additionally, if the nominee is inheriting the investment, she needs to submit an indemnity bond if the value of investments is greater than 1 lakh.
What should you do?
We suggest that you keep a joint holder instead of just a nominee as then it’s easier to pass the investments to your inheritor in case of your death. The mode of holding is your choice: joint holding or anyone/survivor. The latter is preferable if there’s only one investor who will operate the account. But you can also nominate someone, instead of having a second and/or third holder. The nominee doesn’t have to be a family member. You can also de-nominate the person if you change your mind later.
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