All You Need to Know About Joint Mutual Fund Accounts

In the world of money and investing, joint ownership is a well-known concept. For instance, when a husband and wife buy a house, they might choose to register the property in both their names. A mother can open a joint bank account with her son. The idea, among many others, is to ensure that the transition and accessibility to these financial assets are smooth should the need arise.

But did you know that the principle of joint ownership applies to mutual funds as well? This article seeks to explain the details…

What is Joint Mutual Fund Account?

A joint mutual fund account can have either two or a maximum of three account holders. Since this is joint ownership, all the account holders have equal rights and authority when it comes to operating the account. As a result, the consent and signatures of all the account holders will be required when undertaking any transactions, i.e. purchasing or redeeming mutual fund units.

How does Joint Mutual Fund account work?

When a joint mutual fund account is opened, the Know Your Customer (KYC) details of all the account holders will have to be provided. More importantly, at the time of application itself, there is an option to select the mode of holding – Joint, Any one or Survivor.

If the Any one or Survivor option is selected, then any one of the two account holders can authorise transactions through the account, i.e. buying and selling of mutual fund units. This can be a comparatively hassle-free option where the signatures of all the holders are not always required. However, if at the time of opening the account, the mode of holding is not specified, then by default, a joint holding is assumed. In this case, the authority and signatures of all the holders will be required for any transactions to go through.

Benefits of Joint Mutual Fund account

One of the main benefits of a joint mutual fund account is that it allows for a seamless succession to the remaining joint holder when something untoward happens to one of the holders. Also, in the succession ladder, the joint holder gets preference over the nominee. A nominee will get access to the mutual fund account only when both joint holders pass away. At the time of succession, the documentation process is also easier for a joint holder since a detailed KYC was already carried out at the time of opening of the account.

How to open Joint Mutual Fund Account?

KYC is necessary before investing in a mutual fund, including opening a joint mutual fund account. This can be done online at a KYC Registration Agency. You can select the scheme of your choice and then apply through a mutual fund distributor or the fund house’s website. When making the joint account application, it is important to specify whether you want the Joint option or the Any one or Survivor mode.

Things you need to know about Joint Mutual Fund Account

First, on the taxation front, for Equity Linked Savings Schemes (ELSS), the main holder can avail of tax benefits in the Either or Survivor mode. This principle also applies to capital gains tax (long-term or short-term), where the main joint holder will have to account for it. Second, you can add a nominee to a joint mutual fund account, but the nomination will come into effect only after both joint holders' death. Third, minors are not allowed to be a part of joint mutual fund accounts.

To conclude…

A joint mutual fund account can be considered by investors who wish to ensure smooth succession and easy access to the funds when one of the joint holders is no more. Depending on how investors want the transactions to be carried out, they can choose the Joint mode or Any one or Survivor mode. What scheme investors choose to select ultimately will depend on their financial goals and risk appetite.