How Joint Holders differ from Nominees in Mutual Funds

By general definition, a joint holder means an individual who is jointly a member of an account with another individual. Both of them shares the same account and have accessibility to that account without each others permission. Joint holder can be of a bank account as well as for mutual funds. Generally joint holders are either family relatives or close friends.

Joint holder in Mutual Funds:

Joint holding in mutual funds is a good idea because it shares the responsibility between the joint account holders and helps in bringing discipline regarding then use of the fund. One can have joint mutual funds account with up to three individuals. As now more than one person in involved in maintaining the funds none would intend to operate the account according to his own wish. If the holder is a family member then it also helps in maintaining a family budget and prevents unnecessary withdrawal or redemption of the mutual funds. The most important advantage of joint holding is that in case of sad demise of the first holder the units of the funds he has already owned goes to the second holder automatically after submission of some necessary documents.

Nominee in mutual funds:

One can nominate an individual in his mutual fund account who after the demise of the account holder inherits the assets or funds. As per norms and rules of SEBI, one can have maximum of three nominees. The main intention of nominating an individual in a mutual fund account is to transfer him all the rights and amounts owed with respect to the Fund Holdings after the owner’s death. However one can nominate only individuals. Non-individuals such as any Trust, Society or Corporate Body cannot be nominated in case of mutual fund.

Which one is better: Joint holder or Nominee?

It is always better to have a joint account holder than a nominee as joint holders are part owners of a person’s investment whereas nominee is just a trustee to it. Legally nominee becomes the owner only after the holder’s death and gets the amount at that time only. A mutual fund advisor suggests the investors to have a joint holder instead of nominee because it is easy to pass the investment to the inheritor in case of sudden demise. Although an investor decides to invest in any mutual funds for his own benefit but its always better to have a planned and organized investment such that if the primary holder is absent there will be no issues in the fund management. In order to make the investment easy it is always better to have a joint holder than a nominee. Thus for those who are planning to make a long term good investment should allow joint holding as it will help him in the smooth running or operation of the fund.

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