Why Your Mutual Fund Units Need a Nominee Today

We all invest with one clear purpose — to secure our future.

Through SIPs and long-term investments, we try to build financial stability for ourselves and for our families.

But there is also an important question we rarely think about. "What happens to these investments if we are not around?"

Why Nominee Is Important in Mutual Funds?

Naturally, we would want the money we worked so hard to build to reach our loved ones without difficulty. We want our family to be financially secure and not struggle to access the investments we created for them.

Unfortunately, this does not always happen smoothly.

According to SEBI data, over ₹3,400+ crore worth of mutual fund investments in India currently remain unclaimed. (SEBI’s annual report for FY 2024-25)

If we look at all financial assets together, the number becomes even more alarming — nearly ₹3.5 lakh crore is lying unclaimed across the financial system. (Source: ET)

Bank deposits alone account for ₹0.70 lakh crore of unclaimed money. (Source: ET)

The surprising part is that most of this money is not forgotten investments. In many cases, families are simply unaware of the investments or the nomination details, and therefore, the money remains unclaimed for years.

This is where nomination becomes extremely important.

Nomination is a simple process where you specify the person who can claim your investments in case something happens to you. It ensures that your family can access the funds smoothly and reduces delays or procedural difficulties.

However, one important point should be clearly understood.

A nominee is only a custodian of the funds, not necessarily the final owner. The legal ownership of the money ultimately belongs to the rightful heirs, and the final distribution depends on applicable personal laws and any valid will.

Therefore, it is generally advisable to keep your legal heirs as nominees, so that the transition of investments to your family happens smoothly.

Nomination acts like a bridge between your investments and your loved ones. It ensures that your financial efforts continue to support them even when you're not there. Life is unpredictable. During emotional situations financial matters can become complicated for the family.

If a nominee is added the transition of investments becomes much smoother. Your family can access the funds without going through procedures at a difficult time. This reduces stress. Ensures that money is available when it is needed most.

Nomination also helps avoid confusion or disputes. When there is no direction family members may not always agree on how assets should be handled. A nomination provides clarity. Removes uncertainty.

Adding a nominee alone is not enough. The nominee must actively claim the investments. If no one steps forward to claim them the money can remain unclaimed despite all the planning.

Another common mistake is not informing the nominee. If your nominee is not aware of your investments they may never claim them. In cases even properly nominated investments can remain unclaimed for years.

A Simple Real-Life Situation

Let’s understand this with an example. Karan Mehta had built his investments carefully over the years. He had mutual fund investments aligned with different needs—one for long-term needs one for his partner’s security and one for his child’s future. He also made sure to add nominees to all his accounts. He informed his family about these investments and shared basic details with them.

This small step ensured that in case of any event his family would be able to access the investments easily without having to struggle with paperwork or delays.

Is Nomination Mandatory?

Yes nomination has been made mandatory for mutual fund investors. You are required to either add a nominee or formally opt out. This applies to both existing investments, whether held individually or jointly.

How You Can Add or Update a Nominee

Adding a nominee is a process. You can do it online or offline. If you prefer methods, log in to your investment account select your portfolio and enter nominee details such as name, relationship and share percentage. If you are not comfortable doing it yourself, you can visit the investor service center for assistance.

Key Things You Should Keep in Mind

• You can add up to three nominees
• If you nominate a minor you must provide guardian details
• Nomination is not permanent—you can. Change it anytime

A Quick Nomination Checklist

Before you consider your nomination complete, make sure:

• The nominee’s name is spelled correctly
• Relationship details are clearly mentioned
• Share percentage is defined (if there are nominees)
• Guardian details are added (if the nominee is a minor)
• Nominee details are updated after life events

When Should You Review Your Nominee?

Nomination is not a one-time activity. You should review it whenever there is a change in your life, such as

• Marriage
• Birth of a child
• Changes in family structure
• Any significant financial change

Keeping your nominee updated ensures your investments always reach the person.

What Happens If You Don’t Add a Nominee?

If you do not assign a nominee, your investments do not automatically transfer to your family. Your loved ones will have to go through a process to claim the funds. This may involve submitting documents to establish heirship and waiting for approvals.

This can delay access to money at a time when it may be needed the most.

Clearing Common Misunderstandings

Many people believe that adding a nominee means transferring ownership to that person. That is not correct. A nominee acts as a receiver or custodian of the funds. The actual ownership lies with the heirs, and the final distribution depends on applicable laws or a valid will.

A will in hand covers all your assets (except insurance) and clearly defines how they should be distributed.

Who Can Be a Nominee?

You can nominate family members, friends, or dependents. Even a minor can be nominated, provided a guardian is assigned.

Conclusion

You have taken the effort to build your investments over time. Do not let a small missing step create delays or complications for your family. Adding a nominee is important. Informing your nominee is equally important. Ensuring they know how to claim the investments is what truly completes the process. Take a minute today. Review your investments. Check your nominee details. Inform the person. Because what you build should always reach the people it is meant for.

FAQs

Q) Is adding a nominee to ensure my family receives the money?
No adding a nominee alone is not enough. The nominee must also claim the investment. If no one comes forward to claim it the money can remain unclaimed. It is equally important to inform your nominee about your investments and guide them on how to access them. It is then the responsibility of the Nominee to hand over the money to the legal heir. 

Q) Does a nominee become the owner of the investment?
No, a nominee does not become the owner. A nominee acts as a custodian or receiver of the funds. The actual ownership belongs to the heirs, and the final distribution depends on applicable laws or a valid will.

Q) What happens if I do not add a nominee to my mutual fund investments?
If you do not add a nominee, your family will have to go through a process to claim the money. This may involve submitting documents to prove heirship, which can lead to delays and complications during an already difficult time.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.