Can Your Nominee Claim Mutual Funds Without a Will? SEBI’s Latest Rules Explained (2025 Guide)

Introduction

In India, millions of people invest their resources in mutual funds as the tool of securing the finances of their families in the future. But what happens to such investments when the person who made them dies, especially when there is no will, is still a burning question. With SEBI revising rules on nominations and transmission in 2025, it is essential for investors to comprehend the distinction between a nominee and a legal heir, as this knowledge is critical for taking proper action under the new norms. This blog outlines the new rules of SEBI, identifies the rights of nominees and heirs, and explains the process they should pursue to integrate with the latest legal commands.

What Is a Nominee in Mutual Funds – and What Do Recent SEBI Rules Say?

A nominee refers to an individual appointed in a mutual fund account to receive units upon the death of the primary investor. According to SEBI’s regulations of 2025,, it is mandatory for all mutual fund accounts to either designate a nominee or file an official opt-out declaration by March 1, 2025; failure to do so will result in transaction suspension. It has been clarified by both the Supreme Court and SEBI that a nominee acts as a trustee rather than the legal owner of the assets. Ultimately, the funds are inherited by the legal heir, who is determined in accordance with succession laws or a valid will.

Key Legal Points:

• SEBI permits up to ten nominees per account, necessitating PAN or Aadhaar information for each.

• While nomination is compulsory, it does not supersede inheritance laws such as the Indian Succession Act of 1925 or the Hindu Succession Act of 1956.

• The process of nomination enables smooth transfer of units but does not grant ownership rights.

Nominee vs. Legal Heir: Legal Rights Explained

In asset inheritance, it is critical to differentiate between the nominee and the legal heir. The rights of these two types of persons are vastly different, and the table provided below displays some of these distinctions.

The Supreme Court has clarified in several decisions that a nominee is merely a caretaker, and legal heirs can enforce their right over mutual fund units if they are not identical to the nominee.

How Does SEBI’s 2025 Framework Changes the Nominee Claim Process?

The nominee claim processes are modified in line with the 2025 Framework put in place by SEBI. The 2025 rules of SEBI make the process of nominee claim of mutual funds understandable and quick by making some key changes, such as:

• Nominee Registration is Mandatory – Every investor must register a nominee (unless a formal opt-out is filed).

• An easier claim process has been introduced by the transmission, which now demands only an attested copy of the death certificate along with some basic KYC details of the nominee to expedite the settlement.

• Rights of legal heirs are protected in legacy cases; nominees do not become ultimate beneficiaries, and legal heirs retain their right to contest claims under the relevant laws of inheritance and succession.

Claim Process: If a Will Exists

• The nominee submits a transmission request along with the required documents (death certificate and KYC).

• Funds are transferred to the nominee’s account quickly, with the AMC or Registrar & Transfer Agent acting only as a facilitator.

• If the will specifically appoints different heirs, they can claim their inherited rights under the succession law, rendering the nominee and the trust-based trustee powerless.

Claim Process: If No Will Exists

• The nominee again follows the simplified process using the death certificate and KYC to receive the units.

• However, since there is no will, the legal heirs must establish rights according to personal succession laws:

• Hindus under the Hindu Succession Act, 1956

• Muslims under Muslim Personal Law

• Christians/Parsis under the Indian Succession Act, 1925

• Heirs can approach the nominee and request a transfer of assets or settle disputes legally.

This way, nominee registration ensures quick transfer for record purposes, while succession laws decide the actual ownership based on whether a will exists or not.

Why Having a Will Still Matters

Relying only on nomination can create legal delays or disputes since nominees are not ultimate inheritors. A probated will gives clarity, direct control over succession, and less room for legal challenges, especially if the nominee and legal heirs are different persons or have conflicting interests. To write your own legal will online simply and affordably, you can visit write your will online landing page. 

Frequently Asked Questions (FAQs)

Q1: Can a nominee inherit mutual funds after the death of an investor?

A: The nominee can claim mutual fund units after the investor's death as a trustee. However, the legal heir, as defined by will or succession law, ultimately inherits the units. The Supreme Court and SEBI regulations clarify that nomination does not confer beneficial ownership.

Q2: Is nomination mandatory for mutual funds in India? Do they have to undergo nomination in the year 2025?

A: Yes. SEBI regulations, effective from March 1st, 2025, require all investors to either nominate someone or explicitly opt out. Accounts and related transactions may be frozen until compliance is fulfilled, meaning that investors must select a nominee or choose not to participate. 

Q3: What if there is no will and no nominee?

A: If there is no will and no nominee, legal heirs need to obtain a succession certificate or a court order and present it to the Asset Management Company or Registrar and Transfer Agent (RTA) alongside other required documents. The mutual fund units will be distributed as per personal succession laws of the deceased's religion. To know more or apply for a Legal Heir Certificate, you can refer to this legal heir certificate service page.

Q4: Does a will override nomination in mutual funds?

A: Yes. A legally valid and probated will takes precedence over nomination. The mutual fund units will go to the heir(s) as directed in the will, in accordance with the law. Using an easy and secure platform like AasaanWill lets individuals draft legally valid wills from home with expert legal support, providing clarity and control over their asset distribution.

Q5: What documents must a nominee submit to claim mutual funds?

A: To claim mutual funds, nominees should submit the following documents: The nominee must submit a transmission request form, fill out a request form, provide the death certificate of the investor, and KYC documents. In case of legal heirs contesting the nomination, additional evidence and more documents, such as a succession certificate, may be required.

Conclusion

SEBI's 2025 framework improves clarity and efficiency in mutual fund nominations and ensures fair claims processing. In cases of outdated nomination schemes, inheritance law takes precedence. Nominees must wait for legal heirs' status to be determined by a will or succession law. To facilitate smooth wealth transfer, investors should regularly update nominations, maintain valid wills, and families should seek legal advice to comply with SEBI regulations and protect wealth for future beneficiaries.