Minor as a Nominee in Mutual Funds - A Process Note

Who can be the guardian of a Minor?

In case an investor wants to make their minor children a nominee in their mutual fund holdings, they have to appoint a guardian. A guardian can be:-

  • ▶️a natural guardian such as father / mother, or 

  • ▶️a court appointed guardian / legal guardian. 

Submitting Minor Nominee details at the time of investment / addition later on

There are no strict rules while making a minor a nominee at the time of investing in mutual funds or adding/modifying the same at a later date. Different AMCs follow different process for the same. For eg;,

  • ▶️Some AMCs asks for the name of the guardian of the minor nominee, who may or may not be father / mother / court appointed guardian. It makes no sense because at the time of claim, transmission can happen only through father / mother or court appointed legal guardian. A proof has to be provided. One should note this and be careful.

  • ▶️Some AMCs accept guardian of the minor nominee to be the same person as the first holder or the second holder. This is technically incorrect because :-

  1. in case of death of the 1st holder,  the 2nd holder automatically becomes the first holder by providing the death certificate of the first holder. Nominee has no right here. 

  2. In case 1st holder is surviving and the death of the 2nd holder, nothing changes and 1st holder remains the owner of the folio.

  3. In case of death of both 1st holder and 2nd holder simultaneously, the transmission can happen but only through a legal guardian appointed by court. 

Ideal Nomination Process

  • In case of father being the 1st holder / only holder, mother or a legal guardian appointed by court should be made the nominee of the minor.

  • In case of mother being the 1st holder / only holder, father or a legal guardian appointed by court should be made the nominee of the minor.

  • In case father & mother are the 1st holder and the 2nd holder, a legal guardian appointed by court should be made the nominee of the minor.

Can a legal guardian of a minor has access to other investments / properties of the minor, other than the said mutual fund folio where he/she is a legal guardian? 

There are some limitations. Take a legal opinion from your CA / Lawyer.

What happens after the transmission process gets completed?

The minor becomes the single/sole holder in the folio represented by the guardian. Once the child attains 18 years age he/she needs to change the status of sole account holder from minor to major.

In case of successful transmission of folio in the name of minor, where are redemptions proceeds credited, if redemption is done?

In the bank account of minor. Such bank account must have the same legal guardian as mentioned in the nomination details of the folio. 

Let’s look at various scenarios

Scenario 1 

Father is the first holder with his minor daughter being a nominee.

  • In case of death of the father, only mother of the minor daughter or a court appointed legal guardian can apply for transmission of the units in the name of the minor.

Scenario 2

Father is the 1st holder, Mother is the 2nd Holder, Minor is a nominee

  • When there are multiple holders in a folio, then in case of demise of primary holder, if there is a surviving holder, then he or she automatically becomes the primary holder. Nomination will come into effect only if all holders or the single holder have demised.

  • In the above case,

  • upon the death of father, Mother (2nd holder)  will become the 1st holder.

  • In case of death of mother (2nd holder),  father will remain the 1st holder.

  • In case both father and mother dies simultaneously, transmission can happen in the name of minor through a legal guardian appointed by court.

Process of Transmission when the nominee is Minor.

Below mentioned documents Needed to be Submitted:

  • Claimant (Guardian)  has to submit the Transmission Request Form (Form T3*).

  • Original Death Certificate or Photocopy of Original Death Certificate duly attested by a Notary Public or a Gazetted Officer need to be submitted.

  • Copy of Birth Certificate of Minor Nominee.

  • Copy of Pancard of Guardian.

  • Cancel Cheque or Bank Statement / Passbook not older than 3 month.

  • If transmission amount is upto 2 lakh then signature of Guardian as per the Bank A/c of the minor or the joint bank A/c of minor & guardian needed to be attested by the Bank Manager as per Annexure - Ia*.

  • If the Transmission amount is more than 2 lakh signature of guardian should be attached by a Notary Public or a First Class Judicial Magistrate in the space provided in TRF (Transmission Request Form) below the signature of the claimant

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