Have A Mutual Fund Investment In A Minor's Name? Here's What To Do When They Reach 18

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oi-Ajeeta Bhatia

Published: Saturday, June 10, 2023, 14:16 [IST]

Investing in mutual funds is a popular option for people who want to enhance their wealth over time. While the majority of investors open mutual fund accounts in their own name, some may choose to invest in the name of a minor, such as a child or grandchild. Because of the power of compounding, investing early on can provide a considerable advantage, allowing the investment to possibly expand over time.

When your child turns 18 and becomes a major, the first thing you must do as a parent/guardian is alter the status of the single account holder from Minor to Major; otherwise, all transactions in the account will be blocked. Here are some things to think about when a minor reaches the age of 18 and has a mutual fund investment in their name.

How to change the status of minor attaining majority?

When the units are held on behalf of a minor, the minor receives ownership of the units. Only until the minor reaches the age of majority may the guardian administer the minor’s account.

According to SEBI, upon acquiring the status of a major, the minor in whose name the investment was made is obliged to give full KYC details, cancelled original cheque leaf of the new account and updated bank account details. No further transactions will be permitted until the minor’s status is changed to major.

As a result, when a minor becomes a major, he or she must submit an application for change of status from Minor to Major in the appropriate form.

From the moment the minor attains majority, the guardian is not permitted to engage in any financial or non-financial transactions. All existing standing instructions, such as SIP, SWP, and STP, that have been registered for a period of time longer than the day the minor attains majority, will cease to be performed on the day the minor attains majority.

In brief, the guardian must freeze the minor’s account for operation on the day the minor reaches the age of majority, and no further customer-initiated transactions are permitted until the status is converted from minor to major.

The unitholder should before submitting the MAM application form for a change in status from Minor to Major –

  • Apply for a PAN and receive a PAN card;
  • Finish the KYC process; and
  • Change the status of an existing bank account from Minor to Major as soon as the minor becomes Major and receive a new cheque book with your name pre-printed on it.

Documents required-

  • The necessary MAM form was completely filled out.
  • A Copy KYC Acknowledgement or duly filled KYC form.
  • Copy of the applicant’s PAN Card.
  • A cancelled check leaf with the applicant’s name pre-printed on it, or the applicant’s most recent bank statement/passbook.
  • Signature attestation by bankers
  • Form for Nomination.
  • A new SIP, STP, or SWP mandate (in order to continue the SIP, STP, or SWP, if appropriate.)
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Story first published: Saturday, June 10, 2023, 14:16 [IST]