Suppose a person, Mr. Ramesh, invests in XYZ Mutual Fund. But, if he doesn’t share the investment details with his family and dies unexpectedly, what will happen to his unclaimed Mutual Fund?
Many families face this situation as the head of the family doesn’t tell the family about the financial facts. As a result, family members don’t show interest in knowing about the investment details.
So, what happens to unclaimed Mutual Funds in such situations?
There is nothing to worry about as mutual fund companies have a few options to deal with this. Unclaimed Mutual Funds are those in which either the invested amount of a deceased person is not claimed by the family, or the redemption or dividend payout is not transferred into the unit holder’s bank account.
There is no maturity notion in mutual funds except for a few types of mutual funds. So, even if the family doesn’t claim the invested amount, the mutual fund will operate normally without being classified as an unclaimed Mutual Fund.
In such cases, the mutual fund companies will only know about the unit holder’s death when the family members approach them for the claim.
However, this is a little scary, and there should be rules in place. For example, if there are no transactions or updates for a specific folio for a particular number of years, mutual fund companies should contact the unit holders to find out what their status is. Otherwise, if the unitholder dies without sharing the mutual fund investment details with the family, and if the fund is an open-ended fund, an investment may remain with the mutual fund company for an indefinite period. In such cases, the mutual fund company will be unaware of the unit holder’s death, and family members may not know about the mutual fund investment.
The only way to deal with such situations is to notify the family members about the mutual fund assets. Otherwise, the mutual fund companies will assume that the person is still alive and carry on as usual. In such cases, the family may never claim the money that the person had invested.
If the units are held in Demat format, then family members can approach mutual fund companies to claim the investment. However, it’s not advisable to hold units in Demat format as it has several disadvantages.
To claim unclaimed redemption or dividend amounts, investors are required to submit a completed “Unclaimed redemption/dividend claim form” and comply with the requirements stated in the form.
SEBI has made it mandatory for mutual fund companies to provide details of unclaimed investments on their websites. An investor can check the unclaimed sum by providing his folio number on the AMC’s website.
If the investor does not remember his folio number, he may go to the website of the registrars of CAMS or KFintech to check the unclaimed money status by inserting details like PAN number and email id or mobile number, or bank account details.
After completing the necessary formalities, investors will receive the original amount payable to an investor, along with any interest earned, by deployment in permitted instruments (Overnight Funds, Liquid Funds, and Money Market Funds of AMC specifically for the deployment of the unclaimed amounts) until three years from the date of the instrument.
It is best to disclose your mutual fund investing information with your family, given all of the current ambiguity. Also, ensure that you have updated the most recent communication details, such as address, email address, and contact number.