MUMBAI
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People who hold mutual fund (MF) units in Statement of Account (SoA) form—that is, outside of demat accounts—can now add or remove joint holders and transfer those to others online.
On 17 June, Mint covered the step-by-step process of transferring or gifting MF units held in an SoA. Today, we will discuss other important updates.
Adding or removing joint holders
Earlier, non-demat MF investors could not add or remove joint holders. Offline functionality was also absent.
Vishal Dhawan, a registered investment advisor (RIA) and founder of Plan Ahead Wealth Advisors, said a joint holder is like a co-owner of the mutual fund, whereas a nominee simply acts like a custodian and is responsible for eventually transferring units to legal heirs.
For example, earlier, when a couple separated, they had to first dematerialize MF units held in the joint ownership account and transfer them to a single-ownership demat account. But now they can remove one holder from the account after mutually agreeing to it.
Similarly, a person can seamlessly add their spouse as a joint holder.
“By allowing spouses to be added as joint holders, the transmission in the event of death becomes easier. A joint holder is essentially inheriting in its own right and not as a trustee of the eventual heir. In a way, a joint holder is a shared heir rather than a nominee, who is required to transfer the amount to the legal heir,” said Harsh Roongta, an RIA and founder of Fee Only Investment Advisers.
“Allowing such additions will reduce the burden during hard times.”
When a minor turns 18, the account becomes a major account. Earlier, a joint ownership could not be added when the minor became a major. Now, parents or guardians can add themselves as joint holders when the minor account turns major.
If they choose the ‘joint holder’ option, transactions require the approval of all parties in the account.
If one of the joint holders dies, the surviving joint holder can add another person as a joint holder. Since 18 May, investors can visit the CAMS or KFintech website to add or remove joint holders.
A nominee can transfer units directly to legal heirs
The transfer of units to legal heirs after a unitholder’s passing was a cumbersome process before. Once the unitholder expired, the nominee would get access to the units. It was the job of the nominee to then transfer those units to the rightful legal heirs.
Since unit transfers weren’t allowed in the SoA form before, the nominee had to dematerialize those units and open demat accounts for each legal heir to transfer the units.
“It used to be a long and tedious process and would sometimes take weeks,” said Dhawan. “If the nominee decided to sell those units and distribute those to legal heirs, then the nominee would incur the entire capital gains.”
Now, the nominee can simply visit the MFCentral website and directly initiate a transfer. The site automatically redirects the user to either the CAMS or KFintech site, depending on the AMC they’ve chosen.
Dhawan said the new changes are a welcome move and will make life easy for many of those who are holding mutual funds in non-demat form. “In bank accounts, people can easily add or delete joint holders, and many assumed this could also be done for mutual funds. That wasn’t true before, but now they can do so.”