Investing in a minor’s name, and minor to major

A mutual fund folio can be opened in a minor’s name. The child is the owner; a guardian operates the folio until the child turns eighteen, and then a one-time change of status hands it over. This page covers the mechanics only. Choosing what to invest in for a child’s goal is a separate matter, covered in planning a child’s education.

The minor is the only holder

The minor is the first and sole holder of the folio. Joint holders are not allowed on a minor’s folio.

Who can be the guardian

• A natural guardian: the father or the mother; or
• a court-appointed legal guardian, with a copy of the court order.

A minor cannot complete KYC, so the guardian invests on the child’s behalf and the guardian’s own KYC must be complete.

Documents to open the folio

• Proof of the minor’s date of birth: a birth certificate, a school leaving certificate or mark sheet from a recognised board, a passport, or other valid proof of the date of birth.
• Proof of the guardian’s relationship to the minor, if the date-of-birth document does not already show it.
• For a court-appointed guardian, the court order.
• The guardian’s KYC.

Where the money comes from and goes to

• Payments in can come from the minor’s own bank account, from a parent or legal guardian’s account, or from a joint account of the minor with the parent or guardian.
• Payments out go only to the minor’s own verified bank account.
• A SIP, STP or SWP on the folio is registered only up to the day before the minor turns eighteen, even if the mandate runs longer.

Minor to major at eighteen

When the child turns eighteen, the folio has to be changed from minor to major status. The request is made on the fund house or registrar’s change-of-status form and needs:

• the new adult holder’s own KYC;
• their bank account details, with a cancelled cheque, since payouts now go to their account;
• the signatures the form asks for, including the existing guardian’s.

Until the change is made, the folio is frozen: the guardian can no longer transact from the date of majority, no transactions go through, and any SIP, STP or SWP stops. Having the documents ready by the birthday keeps the gap short.

If the guardian changes

A new guardian must also be a natural guardian or a court-appointed one, and their name and signature must be registered as guardian with the minor’s bank. If the earlier guardian has died, an attested copy of the death certificate is needed.

Source: SEBI Master Circular for Mutual Funds, para 15.13 (payment and payout rules for minors, from 15 June 2023); AMFI guidelines on minors’ accounts and change of status (circular 86/2020-21, 16 July 2020).