I am a US Citizen OCI card NRI. Myself and my brother are nominees in my super senior citizen father Growth oriented mutual funds. In my fathers absence what is the policy of transmission of units to nominees ?
I heard being a US Citizen I have to file form US Tax Form 8938 and Form 8621 (International Mutual Funds are regarded as Passive Foreign Investment Company (PFIC) in USA). I will be taxed in USA at almost 40% on capital gains. also have to file Indian taxes.
- On transmission of inherited Mutual Fund units should I sell all the funds to avoid tax complications or continue the funds on our name ?
- If we sell all the MF units inherited can I ask the AMC to credit the money to my NRE bank account so that I can repatriate the money to USA easily? OR by law it will be credited first to my NRO bank account. (If it comes to NRO account I have file Form 15 CA and 15CB using the help of a Chartered Accountant.)
- Can we (nominee) liquidate the Tax Saving Bank Bank Fixed Deposit before 5 yr period when there are no more living joint holders?
Thank you all.
1 – I believe that you can still continue with the mutual fund investments.
2 – As per the RBI’s website –
“The amount due/payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/authorised bank in India.”
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3 – A 5 year Tax Saving FD is locked for 5 years. There is no way it can be pre-maturely withdrawn , except under situation of death of an investor (as per RBI’s guidelines).
Thank you Sreekanth answering my question.
Follow up question:
- On the death of all account holders of a Tax saving FD (5 yr) the claimant (nominee) can prematurely withdraw from a Tax Saving FD without any penalty ? Please clarify.
- Exit Load Debt Mutual Fund: On the death of all account holders of a Mutual fund with Exit Load can the claimant (nominee) sell the units early without any penalty. (My parents have a Mutual Fund SBI Corporate Bond that has a exit load before 36 month period)
- ELSS Fund Death Unit holder: On the death of all account holders of an ELSS Mutual fund can the claimant (nominee) sell the units before 3 yr period.
Thank you again,
1 – I am not very sure on penalty case. You may have to check with your banker on this.
2 – I believe that in the unfortunate event of death of the investor, no exit load on redemption/switching out of units by the nominee/joint holder, as the case may be. However, do check with the concerned Fundhouse.
3 – In the event of death of the investor, the nominee or the legal heir can withdraw the amount only 1 year after the date of allotment of units to the deceased. Hence, if the investor dies six months after purchasing the units, the nominee has to wait for at least six more months to be able to sell the units. Note nominee can get the units transferred to him/her much earlier but can’t sell those until 1 year is over.Essentially, the lock-in period goes down from 3 years to 1 year in the event of demise of the original investor.
Thank you Sreekanth. We are 2 brothers. We are thinking to create a Legal Will. All the mutual funds and bank accounts of my father have nominees registered.
- Is the Legal Will supersede the nominees ? Please clarify my understanding: During the transmission of bank accounts/mutual funds the nominee receives all the money under the nominee name and then he has to share as per the legal Will. Nominee acts like a trustee and then he has to distribute the assets as per the Will or the succession certificate.
- Do we need to register the Will ? Or the will can be just created by a lawyer and signed by father and kept in a safe place (bank locker)
- If there is a legal Will then we don’t need the legal heir or succession certificate. Is that correct ?
- Is it better to get a legal Will done even though there is a cost to register the Will ? What do you you think as a Financial Planner ? (I have good relation with my brother !)
Registration of WILL is not mandatory, but advisable to get Registration done.
WILL supersedes the Succession Act.
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