If you are investing in mutual funds on behalf of minor!!!

I am handling portfolio of many investors who do the investment in mutual funds on behalf of minor, but now lot many changes are made in rules in mutual funds so before investing you should understand few important points related to investment in mutual fund on behalf of minor through Guardian.

(i) The minor shall be the first and the sole holder in an account (folio). There shall not be any joint accounts with minor as the first or joint holder.

(ii) Guardian in the folio should either be a natural guardian (i.e. father or mother) or a court appointed legal guardian.

(iii) Copy of the document viz. birth certificate, passport copy, etc evidencing date of birth of the minor and relationship of the guardian (natural or legal guardian) with the minor should be mandatorily provided while opening the folio.

(iv) It is better to open bank account in the name of minor for mutual fund investments, though mutual fund accepts the bank details of guardian but at the time of redemption it creates problem as the cheque (redemption amount) is issued in the name of  Minor Represented by guardian  and more so, some (Pvt.) banks don't accept the cheque and investor face lot of problem to get the redemption money.

Latest problem i faced with this issue as My client is NRI Investor and Investment was made as Minor through Guardian, when  we did investment that time their was no such rule as we require Bank details of Minor but after redemption the bank rejected direct credit as we have not provided bank details of minor but bank details was in the name of guardian and client status was NRI,(and he faced lot of problem to open bank account in the name of minor and almost took month's time to get the account in name of minor following all rules and regulations and providing all supporting documents) finally,  to get the redemption money we provided bank details of minor and then only the amount got credited in minor's bank account.




One suggestion: If you do investment in the name of Minor, please don't redeem within few years, let your money grow and help your child rather put a full stop to your investments, and best is to do investment in your name rather investing in minor and do redemption within 2-3 years.
 

WHEN MINOR BECOMES MAJOR 

The guardian operates the account till the minor becomes a major. When a minor turns major, mutual funds will seek relevant documents.

Prior to that mutual fund will send will send a notice to investors 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 account from 'minor' to 'major'.

After that a notice all transactions/standing instructions/systematic transactions etc. will be suspended i.e. the account will be frozen for operation by the guardian from the date of minor attaining majority.

In order to change the status the investor need to provide following documents to change the status from minor to major:

1. A Service Request form / letter duly filled and containing details of the Fund, name of the major (investor)  & folio number

2. New Bank mandate Registration form if there is a change in the bank account of the investor

3. Signature attestation of the investor (major) by the Bank Manager

4. KYC acknowledgement of the investor – i.e. the minor who has turned major;

 Also refer this http://mutual-funds-personalfin.blogspot.in/2011/06/procedure-for-change-in-status-from.html

Procedure for change in status from minor to major (in mutual fund investment)