How to Invest in Mutual Funds for Minors?

How to Invest in Mutual Funds for Minors?

Roboadviso     Financial Planning,Mutual Funds     Posted On, Thu 15th March, 2018     No comments
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Mutual Funds Minor

Can Minors invest in Mutual Funds?

Most parents usually invest some money in mutual funds or other kinds of investment options in the names of their minor children. Such investments are usually for purposes such as higher education of their children, marriage, etc. These investments remain untouched and get used only for the purposes that they were intended for.

It is possible to invest in mutual funds with minors being the holders of the fund.

Such investments are however governed by certain terms and conditions, as mentioned below.

  • A mutual fund investment folio made in the name of a minor cannot have any joint account holders. The one and only owner of the folio is the minor. It is mandatory for the minor to have representation in the form or a mother, father, or other natural guardian or a court appointed legal guardian.
  • Minors cannot legally enter with others into a valid contract. Hence the application form for investment in mutual funds has to be signed and filled up by the guardian.
  • Documents required: Along with the application form, the guardian of the minor has to provide self-attested duplicates or copies of the below listed documents:
    • The instrument of payment for MF investment, i.e., a cheque which can be from the bank account of the guardian or from the account of the minor.
    • Copy of the birth certificate of the minor of a copy of any other document that is proof of the date of birth of the minor.
    • Copy of the PAN card of the minor’s guardian
  • It is possible to register the guidelines with regards to STP or SWP/SIP only till the time the minor does not turn a major.
  • It is also compulsory for the minor’s guardian to adhere to all the formalities of KYC associated with investments in mutual funds.
  • If there is a change in the guardian of the minor, even when the existing guardian is alive, then a court order for the appointment of the new guardian or an NOC or no objection certificate from the current guardian has to be tendered.
  • It is important to know that the mutual fund account can be operated by the guardian till the minor is younger than 18 years old. However, after the minor becomes 18 years old, then all the activities and transactions in the mutual fund folio account get suspended; it only gets reinstated after the folio status has been changed and updated from being a minor to an adult or a major.

 

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