Mutual fund investments are a good way to accumulate corpus for a child's future needs like education or marriage. A mutual fund account can be open in the name of a minor, that is, those who have not attained 18 years of age. They can, however, not operate the account and investments will have to be made by a guardian on their behalf.
To open a mutual fund account, along with the application some documents will have to be submitted with some documents.
- For KYC requirement birth certificate, school leaving certificate, passport, court order (if the guardian is court appointed), etc are to be provided as evidence of the minor's age and establish his/her relationship with the minor.
- PAN of the guardian.
- Cancelled cheque from minor's account or guardian's account to register a payment instrument and bank account number. Payments will be made from this bank account towards the portfolio.
- The application will have to be filled and signed by the guardian.
- Joint account holding is not allowed for a mutual fund portfolio.
- A nomination is not allowed either.
- A minor will be first and the only holder of the portfolio but it will be operated by a natural guardian (mother, father) or a court-appointed guardian.
- Instructions related to the SIP or SWP can only be registered after the account holder turns 18.
- The payment is made from an account apart from the guardian's, it will be subject to a limit of Rs 50,000 and will be considered as third-party payment.
- Guardian of the minor can be changed after receiving written consent (NOC) from the existing guardian or death of the existing guardian or if a court order appoints a change in guardian. The necessary documents for KYC requirements will have to be complied by the new guardian.
On attaining 18 years of age
- Once the minor turns 18, all transactions are suspended in the account till the status of the portfolio is changed from that of a minor to major.
- Any existing standing instructions will continue but fresh financial or non-financial transactions cannot be made to the portfolio by the guardian after the account holder turns 18 years of age.
- A notice will be ideally sent by the mutual fund company to the account holders before change of status and it is advisable to complete the necessary formalities so as to not withhold account activities.
- Documents will have to be submitted for change in KYC details like PAN, contact details and bank account number.
- Cancelled cheque from the major's bank account will have to be submitted to register the change in bank account details.
- Signature of the now account holder will have to be attested by the bank manager to be included in the records maintained by the mutual funds.