The Private Client team at Cyril Amarchand Mangaldas shares their comments and opinions in an article in the following Q&A which was published by the Mint Newspaper on 20th February, 2022 and the online edition of the same can be found here.
My dad had invested in mutual funds in which my mother was a nominee. I have lost my parents and wish to transmit them in my name. My query is – whether these mutual funds can be transferred to a Hindu Undivided Family (HUF) that I have created to reduce tax liability?
—Name withheld on request
We have assumed that both your parents have died intestate (i.e. without executing a Will). We assume that your father was the sole owner of the monies invested in mutual funds. Therefore, the devolution of your father’s assets (i.e. mutual funds) would be governed by the rules of intestate succession under the Hindu Succession Act, 1956 (“Act”).
We assume your mother passed away before your father. Since you are the only surviving heir of your father, and in the absence of a surviving nominee, the monies invested in the mutual funds would stand transferred in your favour as per rules of intestate succession under the Act. This would be achieved by obtaining letters of administration from a court having jurisdiction. Alternatively, you may also consider obtaining a succession certificate from the court having jurisdiction.
A succession certificate is issued to a successor of the deceased who has died intestate, in order to represent the deceased for the purpose of their estate. Usually, such a succession certificate is a primary document through which the heirs can stake a claim to the assets of the deceased viz. bank accounts, securities, mutual funds, etc. Obtaining a succession certificate is a faster and a convenient mode for transfer or withdrawal of monies invested by your father from the mutual fund.
However, it is important to keep in mind the preference of your bank. It is advisable that you may check which option (i.e. letter of administration or succession certificate) is suitable for your bank.
We assume that you are the karta of the HUF. Therefore, once the mutual funds’ vest in your name, the same can be transferred to the HUF as a gift. The said asset then would reflect in the HUF account.