Sujoy Soin, a businessman from Ranchi, had mutual fund (MF) investments in physical form, with his wife Apeksha Soin as the sole nominee. Unfortunately, both were victims of Covid and died within a fortnight. Having died intestate (without making a will), their two daughters (both married) Vibhuti Gujral (the elder one, settled in Delhi) and Prameela Kathpalia (settled in Australia), started the asset retrieval process, as the Soins’ legal heirs.
For the MF investments, they followed the transmission process stated on the website of the Association of Mutual Funds of India (AMFI: the mutual fund industry body). The transmission process differs based on the value of your investments: up to Rs 2 lakh or above Rs 2 lakh.
For investments worth up to Rs 2 lakh, no succession certificate is required. This is a document that a competent court issues to a legal heir and it signifies and certifies the rightful person(s) to be successor(s) of a deceased person. This is a general certificate and is required for all immovable assets. It forms a base document by claimants or heirs. It is also required by legal heirs when a person dies without a Will.
With whatever other supporting documents that she could get hold of, Vibhuti approached individual fund houses, submitting copies of death certificates of her parents and her own Know-Your-Customer (KYC) supporting documents, that would establish her as a claimant. She also submitted bank attestation of her signature and signed affidavits and indemnities with sureties, and an NOC from her younger sister.
PAN or folio?
The first hurdle investors like Vibhuti face is this: none of the fund houses had clarity on whether the ceiling of Rs 2 lakh applied to investments held per PAN Card or Per Folio (of the deceased investor).
This is important because you might have investments across various fund houses under the same PAN card. Investments across multiple fund houses have different folios. However, if this limit of Rs 2 lakh is applied per PAN, then the limit is far too low and wouldn’t apply to most long-time investors, who would over time, have easily crossed this limit in their overall MF investments.
AMFI guidelines: Room for interpretation
When Vibhuti approached 10 fund houses that held her father’s investments, she hit the first roadblock. AMFI’s guidelines on transmission of assets (transfer of assets in case of death, to the legal heirs) are general guidelines and it allows fund houses to superimpose them with their own additional requirements.
For instance, the legal heirs need to first know the status of existing folios, their account statements, and the latest valuation reports to ascertain if the value of the holdings is up to Rs 2 lakh or above Rs 2 lakh. Vibhuti didn’t get this detail from many fund houses holding her father’s money. Incidentally, the succession certificate, which the fund houses need to initiate the transmission process in the absence of a Will, also requires this detail, if the value of investments is above Rs 2 lakh. Initially, a few fund houses co-operated with her on this front; most did not.
The curious case of ‘all legal heirs vs other legal heirs’
One of the clauses in AMFI’s best practice guidelines on transmission says that if a sole holder or both joint holders pass away without leaving behind a Will or nominations, then the legal heirs must submit the Annexure II form (indemnity bond), and the Annexure III form (an affidavit) by all legal heirs.
This guideline is most relevant where there is no Will of the deceased. So, in the case of the Hindu Succession Act, a deceased man might have legal heirs, such as his mother, wife, and, say, two children. All four are considered to be legal heirs (in the absence of a Will or nomination) in equal ratio and therefore all four surviving heirs must submit the Annexure II form (indemnity bond), and the Annexure III form (an affidavit).
Now comes AMFI’s strange clause. It says that “other legal heirs” must submit an Annexure IV form, which is the NOC or No Objection Certificate. The question is: if all legal heirs have signed Annexure II & III, then who are other legal heirs who will sign NOC?
Apparently, there is no answer to this question in the mutual fund industry.
Logically, if there are multiple heirs and only one or few among them are claimants, then the NOC makes sense. In such cases, the other legal heirs must give an NOC that they do not object to a few staking a claim to the deceased’s assets. In our experience of dealing with as many as 10 different fund houses when handling Vibhuti’s case, neither the fund houses nor AMFI gave us any clarification on the matter.
What should you do?
This case highlights the importance of not only writing a Will, but also having updated nominee(s). If you pass on without writing a Will, then your legal heirs would have to run from pillar to post to sort out your wealth and ensure it gets bequeathed properly. For instance, the two Annexure forms #II (indemnity bond), and # III (an affidavit) must be submitted by all legal heirs. A single form with everyone’s signature on it won’t work.
And if there are some legal heirs, some of whom are not claimants to the wealth, then each of them has to submit a signed NOC. That’s the amount of paperwork that legal heirs have to go through.
Ending on a positive note, I am happy to say that after two months of running around, Vibhuti has got her late parents’ money from 9 of the 10 mutual funds in which they had made investments over the years. Only one fund house needs to come through.
(Names are changed in the illustration to hide actual identity).
Moneycontrol ;-Rajat Dutta May 26 2022
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