Read on to know if the nominee in a mutual fund is obligated to sell or hold the units of a mutual fund
01-Sep-2022
If ABC has invested amount X in a mutual fund and the wife is the only nominee, whether all units are sold and money will be transferred to the nominee just like an insurance company or nominee may continue to hold units with a fresh nominee? Please throw some focus. - Varun Yalvatkar
A nominee in a mutual fund is a person to whom the units of a mutual fund are transmitted when an unfortunate event happens with the unitholder.
In case of an adverse event such as the demise of the investor, the maturity proceeds of bank deposits or insurance policies are transferred to the bank account of the nominee. But, such is not the case with mutual funds.
As we know with mutual funds, the invested money is held as units based on the NAV. These units are transferred to the nominee in case something adverse happens with the unitholder.
Once the units are transmitted, it is at the nominee's discretion as to whether to redeem those units at the applicable NAV or continue holding them as an investment in his/her name. There is no compulsion to sell it or continue it. However, before making any decision, the units' ownership must be first transferred in the name of the nominee.
Also read: What to do when a joint holder in a mutual fund passes away?
SEBI extends mutual fund nomination deadline
Picking the right mode for your mutual fund
SWP: Finding the ideal equity allocation
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