Guardian

A minor is anyone under 18 years of age on the date of investment. Minors cannot enter into contracts on their own, and if they do, such contracts are null and void by law.

That creates a practical problem, because minors routinely need investments made for them — education money, gifts from grandparents, a Sukanya Samriddhi account. The solution is to route every transaction through an adult, and that adult is the guardian.

Parents are the natural guardians of their minor children. Where there is no parent available, a court may appoint a legal guardian instead. Either way, the workbook notes that the guardian plays a role similar to a power of attorney holder acting on behalf of the minor — authorised to act, but on somebody else's account.

Opening the investment. Where the application form identifies the status of the investor as a minor, the date of birth of the minor becomes mandatory information, along with the guardian's details. Additional documents are required:

• the date of birth and proof of it;
• a document establishing the relationship of the guardian with the minor;
• the PAN of the guardian investing on behalf of the minor. Minors may also have a PAN obtained by the guardian on their behalf, and depending on the product, the PAN of the minor, of the guardian, or both may be needed.

How the holding must be structured. An investment on behalf of a minor cannot have joint holders. The investment can be held solely by the minor, or jointly with the guardian where the product permits — but minors have to be sole holders or first holders. Guardians must complete KYC formalities as if they were investing themselves, and sign the application and the payment instruments on behalf of the minor.

Changing the guardian. The guardian may change on the death of the existing guardian or by mutual consent. An application must be made to register the new guardian, with a request letter and prescribed documents:

Attestation may be done by a special executive magistrate, an authorised official of the company, or the manager of a scheduled bank. A natural guardian must submit documentation evidencing the relationship; a court-appointed legal guardian must submit supporting documentary evidence of the appointment. The new guardian's signature in the minor's bank account, attested by the bank, must be submitted, and the new guardian must obtain KYC compliance and furnish evidence of it to the asset management company.

Where guardianship is contested, a petition may be filed in the High Court under the Guardians and Wards Act, 1890 or the Hindu Minority and Guardianship Act, 1956.

A grandfather wishes to settle Rs 12,00,000 on his granddaughter Anaya, aged 9, for her education.

What cannot be done. The money cannot be invested in Anaya's name with her mother as a joint holder in the ordinary sense — an investment on behalf of a minor cannot have joint holders. Nor can the grandfather simply be added as a second holder.

What the folio must look like:

The Rs 12,00,000 is Anaya's. The mother controls it but does not own it.

Four years later the mother dies. The father applies to become the registered guardian and must produce:

• a request letter to the AMC;
• the mother's death certificate, duly notarised or attested;
• proof of his own relationship to Anaya as a natural guardian;
• his signature in Anaya's bank account, attested by the bank;
• his own KYC, completed afresh, with evidence furnished to the AMC.

Until that registration is complete the folio cannot be transacted. A family needing Rs 3,00,000 for the coming year's fees finds the money visible and unreachable — which is exactly the paperwork an adviser is paid to have anticipated.

Had the existing guardian been alive and the change made by consent, the death certificate would be replaced by her no-objection or consent letter, or a court order appointing the new guardian. Everything else is the same.

Chapter 17 (Operational Aspects of Investment Management), in the sections on investors who require special documentation, alongside minors, HUFs, NRIs and power of attorney holders. The operational chapters are heavily represented in the paper and the questions are documentary: what a guardian must submit, whether a minor's folio can carry joint holders, whose KYC and whose PAN is required, and what is needed to change a guardian in each of the two situations.

• A minor's investment cannot have joint holders, and the minor must be the sole or first holder. Both halves get tested.
• The guardian's own KYC is required, completed as though the guardian were the investor. The minor's status does not excuse it.
• Death certificate or consent letter — the two paths are different. Existing guardian alive: no-objection/consent letter or a court order. Deceased: notarised or attested death certificate.
• Attestation is restricted to a special executive magistrate, an authorised official of the company, or the manager of a scheduled bank.
• Parents are natural guardians; a court-appointed legal guardian must produce evidence of appointment. A natural guardian must still evidence the relationship.
• Date of birth becomes mandatory once the investor is identified as a minor — it is what fixes the date the minor attains majority.
• PAN requirements vary by product. The guardian's PAN is required; the minor may also hold one, obtained by the guardian; some products want both.
• A guardian is not a nominee. A guardian transacts now on behalf of a living minor; a nominee receives the investment after the holder's death.