Generally parents want to invest in the name of their child, to secure their future and set aside funds for large expenses like higher education, marriage or just to be passed on. Let’s discuss the regulations for the same and how it can be implemented.
Definition of Minors
Persons below the age of 18. Since they are not legally eligible to enter into a contract, they need to invest through their parents/ guardians.
- The minor shall be the first and the sole holder in an account. There shall not be any joint accounts with minor as the first or joint holder.
- Guardian in the folio on behalf of the minor should either be a natural guardian (i.e. father or mother) or a court appointed legal guardian.
KYC for Minors
KYC requirements have to be complied with by any parent or court appointed guardian.
Documents to be submitted
- Proof of age of minor investor like birth certificate or passport
- PAN of parent or court appointed guardian
- KYC formalities of parent or court appointed guardian
Money can be invested either from the minor child’s bank account or through the parent (or guardian) who has completed KYC.
SIP investing in Minor’s account
SIP will be registered only till the date of the minor attaining majority even though the instructions may be for a period beyond the date of majority.
What happens to a minor child’s mutual fund when he/she becomes a major?
- The folio will be frozen for operation by the guardian from the date of minor attaining majority.
- Prior to the minor attaining majority, the AMC mutual fund will send a notice to unit holder at their registered correspondence address advising the minor to submit, on attaining majority, an application form along with prescribed documents to change the status of the folio from ‘minor’ to `major’.