Why you should be careful about your MF paperwork

Why you should be careful about your MF paperwork

Your family’s comfort is of paramount importance to you. You have been diligently investing in mutual funds (MFs) to take care of your family needs now and in the future. But have you done the right paperwork to ensure that your family has access to your investments with ease in case of any unfortunate event? Nomination is both your right and responsibility. It ensures your investments reach your nominees, without any complication.

An investor can nominate a person to whom his/her MF units will be transferred on his/her demise. We find that about 60% of folios have a nominee registered.

When to file nomination

A nomination can be registered at the time of purchasing units. While filling in an application form, there is a provision to fill in the nomination. In fact, in the current application forms, investors are asked to specifically indicate if they do not wish to nominate.

Alternatively, an investor may register a nomination later through a form which may be submitted with relevant particulars of the nominee.

How many nominees can you have

In this regard, it may be noted that multiple nominations are possible. An investor may make up to three nominations for a folio and even specify the percentage of the units that will go to the nominees. If the percentage is not specified, equal shares will be allotted to all nominees. A minor can be a nominee. However, the guardian will have to be specified in the nomination form. Nomination is at the folio level and all units of all schemes in the folio will be transferred to the nominee(s). If an investor makes further investment in the same folio, the nomination is applicable to the new units also.

It may be noted that a nomination can be changed at any time and even cancelled. The relevant form should be filled and submitted to the registrar.

The benefit

Registering a nomination facilitates easy transfer of funds to the nominee on the demise of an investor. A claimant who is not a nominee would have to produce a host of additional documents such as a will, legal heirship certificate, no-objection certificate from other legal heirs, among others, to get the units transferred. The process is simple if a nominee is registered in the folio.

Why you should fill in vital contact information

MF application forms contain fields for filling vital contact details—email ID, cellphone, home and office numbers—which investors often do not fill as it is not mandatory and lose the opportunity to access a host of facilities and services.

Email ID: Investors whose email ID is registered in their folios are entitled to several benefits. Emails confirming transactions are sent by most funds. This would assure investors of the successful completion of the transaction and even serve as an alert for a transaction having taken place in the folio. Hard copies of account statements for systematic investment plan (SIP) transactions are only sent quarterly. However, if the email option is given, statements would be sent after every SIP transaction.

Phone number: Registering mobile and home/office telephone numbers would entitle one to receive confirmations, reminders and contacts. Most MFs send a transaction confirmation SMS on the completion of the transaction. Timely SMS reminders for upcoming SIP debits are sent by some funds to give investors time to ensure that the amount is available in the bank account.

In addition, if the necessity of a contact arise, having updated telephone numbers would help.

If one has not registered an email id at the time of submitting an application form, one may submit a written request duly signed as per the mode of holding to enable the registrar to register the same in the folio.

N.K. Prasad is president and chief executive officer of Computer Age Management Services Pvt. Ltd.

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