An investor passes away. The family knows there are mutual funds somewhere, maybe several folios across different fund houses, but nobody can actually touch the money. This is a more common scenario than most people expect, and it usually stems from one wrong assumption: that units automatically pass to a spouse or children.
They do not. When a folio has no nominee registered, it simply means there is no person named on record to receive the units on the investor’s behalf after death, and the claim process shifts entirely to legal heirs proving their right to the money. This piece walks through exactly what happens next and how heirs actually get their claim through.
The Distinction Everyone Gets Wrong: Nominee vs Legal Heir
A nominee is a custodian or trustee of the units, not their final owner. Legal heirs are the rightful owners, decided either by the deceased person’s Will or, if there is no Will, by the succession law that applies to them.
In practice, this means even a registered nominee holds the money on behalf of the legal heirs and may eventually have to distribute it according to succession, if a dispute arises. Indian courts have consistently upheld this position. In Shakti Yezdani v. Jayanand Jayant Salgaonkar, the Supreme Court held that a nominee holds securities in trust and does not become their absolute owner, with legal heirs under succession law remaining the true owners. Nomination is a facility for smooth transfer, not a substitute for inheritance. This matters even more when there is no nominee at all, since there is then no interim custodian and the full succession process applies from the start.
What Actually Happens to the Units When There Is No Nominee
The units are not lost, and they are not seized by the fund house or the government. They remain invested, and the NAV continues to move with the market, so the value of the holding can rise or fall while a claim is pending. No redemption, switch, or SIP change is possible until transmission is completed, and any dividends or payouts that arise in the meantime accumulate but cannot be accessed.
It is worth being clear about terminology here. A folio “on hold” pending transmission is simply awaiting the right documentation, and is different from the older idea of a folio being “frozen” for KYC or compliance non-completion. On intimation of death, fund houses stop-mark all folios where the deceased was the first holder against further transactions, but the underlying investment stays intact.
Transmission Explained: How Money Moves After Death
Transmission is the transfer of units from a deceased holder to a surviving joint holder, a registered nominee, or a legal heir. There are three broad routes, in order of how much documentation each requires:
- Surviving joint holder, which is the simplest route, needing only the transmission form, death certificate, and KYC.
- Registered nominee, which needs the same set plus bank details, with signature attestation by a bank manager for claims up to ₹5 lakh, and by a notary or Judicial Magistrate First Class above that.
- Legal heir with no nominee, which is the most documentation-heavy route and the focus of the rest of this piece.
The No-Nominee Claim Process, Step by Step
The claimants here are the legal heirs as determined by the succession law applicable to the deceased.
Step 1. Obtain the death certificate, since every subsequent step depends on it.
Step 2. Identify all fund houses and folios held by the deceased. A consolidated account statement from CAMS or KFintech is genuinely useful here, since it can surface holdings across multiple AMCs in one place rather than requiring a folio-by-folio search.
Step 3. Ensure the claimant is KYC compliant, with a PAN and a bank account ready to receive the transferred units or eventual redemption proceeds.
Step 4. Submit the standard Transmission Request Form to the AMC or the registrar and transfer agent (RTA), along with the supporting documents required for the claim value.
Step 5. The RTA verifies the claim, after which units are transferred into a new folio in the claimant’s name.
Set realistic expectations on timing. This process runs separately for each fund house unless the folios are traced and claimed together, and a cooling-off period of roughly 10 business days is typically applied before redemption is allowed, partly as a fraud check.
Documents Required When There Is No Nominee (By Value)
Documentation scales with the value of the holding at the PAN level, not per individual folio. Based on the AMFI transmission guidelines, the current tiered structure is broadly as follows, though readers should verify exact figures against the latest AMFI Transmission Ready Reckoner since thresholds have been revised before:
- Up to roughly ₹5 lakh at PAN level: simplified documentation, typically the transmission form, death certificate, claimant KYC, bank proof, a notarised indemnity bond from the legal heirs, and a document evidencing relationship with the deceased.
- Above ₹5 lakh and up to ₹10 lakh: broadly the same set, with a No Objection Certificate from other heirs usually added where there are multiple potential claimants who are stepping aside.
- Above ₹10 lakh: court-issued documents become mandatory, such as a succession certificate, probate of the Will, a letter of administration, or a legal heir certificate, depending on the situation.
In plain terms: a legal heir certificate is typically issued by a local revenue authority and identifies who the heirs are, while a succession certificate is issued by a civil court and specifically empowers the holder to collect debts and securities of the deceased, generally requiring more rigorous court proceedings. A probated Will is generally required for higher-value claims where a Will exists, since probate is the court’s formal validation of the Will’s authenticity.
The Succession Law Layer: Why “Who Is a Legal Heir” Is Not Obvious
Dying with a Will (testate) and dying without one (intestate) lead to very different processes. With a Will, assets pass according to its terms, subject to probate where required. Without a Will, heirs are decided by the personal law applicable to the deceased, and this differs meaningfully across communities. The Hindu Succession Act governs Hindus, Sikhs, Jains, and Buddhists, the Indian Succession Act governs Christians and Parsis in the absence of a Will, and Muslim personal law, which is largely uncodified and follows Sharia principles, applies separately.
This is precisely why fund houses ask for court documents above certain values. They cannot themselves adjudicate who the rightful heirs are, particularly where the answer depends on personal law. Any disputes among competing claimants must be resolved among themselves, typically through the courts, and not by the AMC or the RTA.
Special Situations Readers Will Ask About
Joint holders. Units pass to the surviving holder first. Nomination or succession only comes into play once all named holders are deceased.
Minor as heir. The natural guardian operates the claim on the minor’s behalf, and an indemnity requirement typically applies to protect the fund house.
NRI claimants. The process is broadly the same, subject to standard KYC and FATCA compliance, and transmission for NRI claimants may involve additional compliance with FEMA regulations, particularly around which bank account (NRE or NRO) receives the transferred proceeds and how those funds can subsequently be repatriated.
HUF folios. On the death of the Karta, the next senior coparcener typically steps in as the new Karta, with documentation evidencing this relationship required by the fund house.
Current SEBI Nomination Rules Every Investor Should Know (2025 to 2026)
This area has changed more than once recently, so it is worth being precise about the current position. Under SEBI‘s circular dated 29 May 2026, effective from 1 September 2026, nomination is mandatory for all new single-holder demat accounts and mutual fund folios unless the investor formally opts out through a signed declaration. Nomination remains optional for jointly held folios, though any change to a joint folio’s nomination requires consent from all joint holders.
Investors can currently nominate up to three nominees per folio and can specify percentage shares for each, with any unspecified allocation divided equally and any odd lot going to whoever is listed first. Only the nominee’s name and relationship to the investor are mandatory now, with details like PAN, Aadhaar, and passport made optional to reduce drop-off during the nomination process.
It is worth clarifying one point that has caused confusion. An earlier proposal to freeze accounts that had neither a nomination nor a formal opt-out was floated and subsequently dropped, so investors should not be under the impression that their account faces a freeze purely for not nominating. Encouragement to nominate remains strong, but the penalty mechanism itself was withdrawn.
How to Make Sure Your Family Never Faces This
- Register a nominee on every folio, and review it after major life events such as marriage, divorce, or a death in the family.
- Keep nominee details consistent across mutual funds, demat accounts, and bank accounts, so there is no confusion at the point of claim.
- Write a Will, and make sure it aligns with your nominations rather than contradicting them.
- Maintain a single, accessible record of all folios and login details that a trusted family member can turn to.
- Remember the core message throughout: a nominee alone is not a complete inheritance plan.
Beyond Mutual Funds: Nomination and Succession Across Your Wider Portfolio
The same nominee-versus-heir problem exists across an entire investment portfolio, not just mutual funds. Direct equity and demat holdings, Portfolio Management Services (PMS) accounts, bonds, and insurance policies all carry their own nomination and transmission mechanics. PMS accounts in India are governed by SEBI and carry their own nomination and transmission requirements set out in the client agreement and disclosure documents, so the same discipline that applies to mutual fund folios applies there as well.
Treating nomination and estate planning as a portfolio-wide exercise, rather than something handled folio by folio and account by account, is where structured wealth management and estate planning support tends to add real value, since it catches the gaps that a piecemeal approach often misses.
Frequently Asked Questions
Does a nominee automatically become the owner of the mutual fund units?
No. A nominee is a trustee who receives the units on the investor’s behalf, but legal heirs under the Will or applicable succession law remain the ultimate owners, as Indian courts including the Supreme Court have affirmed.
What if there is no nominee and no Will?
The applicable succession law for the deceased’s religion determines who the legal heirs are, and the claim process, including the documentation required, proceeds based on those succession rules and the value of the holding.
How long does mutual fund transmission usually take without a nominee?
It varies significantly with claim value and documentation readiness. Straightforward claims under ₹5 lakh with complete paperwork can move relatively quickly, while claims above ₹10 lakh that require a succession certificate or probate can take several months, since those depend on court timelines rather than the fund house alone.
Can there be more than one nominee for a single folio?
Yes. Under current SEBI rules, up to three nominees can be named on a single folio, with percentage shares specified for each or divided equally if unspecified.
Do units keep earning returns while a transmission claim is pending?
Yes. The units remain invested and their value continues to move with the market, though no redemption, switch, or other transaction is possible until transmission is complete.
Conclusion
Nomination smooths the transfer of mutual fund units after death. It does not, by itself, decide who owns them. Skipping nomination does not put the money at risk, but it does place a heavy, entirely avoidable documentation burden on the very family members who are least equipped to handle it at that moment. The practical takeaway is simple: check the nomination status across every mutual fund folio, demat account, and insurance policy you hold today, rather than leaving it for later.
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Image Published on Mar 16, 2020
