Most people spend years building investments and very little time thinking about what happens to them after death. The family may know that there are mutual funds or shares somewhere, but not know the folio number, broker, bank or even the email address linked to the account. That simple lack of information can turn a straightforward claim into a long and frustrating exercise.
The first thing that happens is not an automatic transfer of every investment to the nominee. The process depends on how the investment is held and whether there is a surviving joint holder, a registered nominee or neither. The institution holding the asset will usually require documents such as the death certificate, claim or transmission forms and KYC documents before it can transfer the investment.
For shares and other securities held in a demat account, the surviving joint holder may be able to have the securities transmitted to them. If the sole holder dies and a nominee has been registered, the nominee can make a claim through the prescribed process. If there is no nominee, the legal heirs may need to establish their claim through the applicable documents and procedures.
Mutual funds work on similar principles, but the process is handled through the fund house or its registrar and transfer agent. A nominee can make a transmission claim, while the absence of a nominee can make the process more complicated. The family may need to provide a Will, legal heir documents or other supporting papers depending on the circumstances and value of the investment.
The main point is that a nominee and a legal heir are not necessarily one and the same. In mutual fund investments, the units or the proceeds for the purpose of transmission are normally allotted to the nominee. The nominee may not be automatically the ultimate beneficial owner. The final distribution can be either by Will or by the applicable succession law.
A Will can help clarify who should ultimately receive the assets. But it is not enough to simply write one and forget about the investments. The Will should be updated when there are major changes in family circumstances or wealth, and the nominations on individual accounts should also be reviewed separately.
Bank deposits and fixed deposits have their own claim procedures. A nominee can generally help the bank settle the deceased customer's account, but the nomination does not necessarily settle every question of ultimate inheritance. Joint holding arrangements, the account mandate and the applicable succession rules can all matter.
Retirement savings also need separate attention. EPF, NPS and other accounts have their own nomination and claim procedures. A nominee recorded for a mutual fund does not automatically become the nominee for your EPF account or bank deposits. The biggest practical problem is often that the family does not know what exists. Keep a secure list of bank accounts, demat accounts, mutual fund folios, fixed deposits, insurance policies and retirement accounts. The list should also indicate where important documents are kept and who can be contacted.
Your investments may take years to build, but transferring them after death should not become a mystery for your family. Keep the nominations updated, write a clear Will and make sure someone you trust knows where the financial trail begins.