Hi,
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.
Questions:
- 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?
12 Answers
Dear Suryarshi,
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."
Kindly visit this link..
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 There is no way it can be pre-maturely withdrawn , except under situation of death of an investor (as per RBI's guidelines).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.
Hi,
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.
Question:
- 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. https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2365&Mode=0 https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7366#set
- 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 !)
Hi,
Registration of WILL is not mandatory, but advisable to get Registration done.
WILL supersedes the Succession Act.
Suggest you to go through below articles, can be useful to you ;
https://www.relakhs.com/nominee-legal-heir-will-importance/
https://www.relakhs.com/last-will-testament-benefits/
Hi...Kindly note that there will not be any penalty on pre-mature closure of 5 year Tax saving FD (in the event of death of the deposit holder).
I recently inherited some mutual funds from my dad as nominee. Transmission of all funds complete. I inherited a ICICI folio number that has 4 funds underneath. They are all non Tax saving ELSS funds. But they all have Exit Load expiring July 2019. ICici MF customer agents in Email or phone saying nominees have to pay exit load. Is'nt that incorrect or illegal? Please clarify. Who should I approach so that I dont incur Ecit Load ?
Hi,
ELSS mutual funds have a lock-in period of 3 years. 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 (original investor / unit-holder).
For example : If the investor dies eight months after purchasing the units, the nominee has to wait for at least four more months to be able to sell the units (if he/she wants to redeem..).
Kindly note that 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. This information can be found in any of the ELSS funds ‘scheme information documents’.
Kindly note that ' no exit load will be charged on transmission of units'.
Related article :
Is Lock-in period for Investments applicable on unfortunate demise of the Investor?
Kindly note that ' no exit load will be charged on transmission of units'.
Related article :
Is Lock-in period for Investments applicable on unfortunate demise of the Investor?Hi Sreekanth you are cirrect about ELSS funds. But my folio in question have regular MUtual funds like Icici Balanced Fund, ICIci multi cap fund, Icici Value discovery. I recently inherited these mutual funds under 1 folio from my dad as nominee. Transmission of all funds complete. They are all non Tax saving funds. But they all have Exit Load expiring July 2019. ICici MF customer agents in Email or phone saying nominees have to pay exit load for the above mentioned funds. Is’nt that incorrect or illegal? Please clarify. Who should I approach so that I dont incur Exit Load ?
Hi Thanks for your comment. My transmitted folio contains ICICI balanced fund, Multi Cap fund and Value Discovery. Why ICICI is saying there will be Exit Load ? Who should I approach to avoid Exit Load. This is illegal for Icici correct. Please clarify.
Hi Sreekanth you are correct about ELSS funds. But my folio in question have regular Mutual funds like Icici Balanced Fund, ICIci multi cap fund, Icici Value discovery. I recently inherited these mutual funds under 1 folio from my dad as nominee. Transmission of all funds complete. They are all non Tax saving funds. But they all have Exit Load expiring July 2019. ICici MF customer agents in Email or phone saying nominees have to pay exit load for the above mentioned funds. Is’nt that incorrect or illegal? Please clarify. Who should I approach so that I dont incur Exit Load ?
Hi,
After your inherit or transmission is complete, in case, you sell the units, Exit load as per the rules will be applicable. I believe that fund house might be correct and they can not cheat an investor in this regard.
You can visit any of their branches and inquire about this in person.
Visit : https://www.icicipruamc.com/ContactUs/BranchLocator.aspx
Also, note that each scheme will have separate folio number. So, four of your funds may have seperate folios, kindly re-check that..
https://www.livemint.com/Money/VRyZxQsad6UMTyf1ihL3tO/No-exit-load-is-charged-on-transmission-of-units-from-a-dece.html
Please read the above link. Is this correct ? No Exit load for trnsmitrans mutual funds. Only Exception are ELSS funds.
Please login or Register to submit your answer