Many parents hold financial assets in their minor child’s name. What happens when the child turns 18? As a major, the young adult is now the complete owner of the asset but to undertake any transactions in it, there are certain steps that the parent and child have to fulfill first. For instance, if your child had a minor’s bank account under your guardianship, the bank will send a notice that the account has been frozen and certain formalities have to be completed within 30 days to operate it.
Get PAN Card
The first and foremost step is to apply for a PAN card in your child’s name. If she already has a PAN, you have to apply for reissue with her latest photo and ID proof. Once you get it, link it to your child’s Aadhaar card. Do ensure that the Aadhaar card is linked to a valid mobile number.
Convert bank account
Once you have the PAN card in hand, visit the bank along with your child for in-person verification. The bank will upgrade the bank account with the new details, take specimen signatures of your child and also issue a new cheque book and debit card. Your child’s bank account can now be used to access any financial asset. The process is the same for fixed deposit and recurring deposits. Link these with the new bank account for credit of all maturity proceeds.
Fresh KYC for MF/ PPF
Mutual fund investments can be made in a minor’s name but once the child turns major, the parent or guardian has no control over them. To convert these into normal individual unitholdings, KYC norms have to be fulfilled with submission of PAN card details, photo, ID and address proof. Once the KYC is done, submit a request to change the status from minor to major along with a cancelled cheque of the new bank account.
The process to convert a minor’s PPF account to a major’s individual account is same; only a fresh passbook will be issued in the new adult’s name. Your child at 18 has the option to extend the PPF account or withdraw the maturity proceeds.
Daughter can get tax benefits on Sukanya Samriddhi Yojana
You may have opened a Sukanya Samriddhi Yojana account for your daughter when she was less than 10 years old. Now that she has turned 18, you need to link her Aadhaar and PAN with it and inform the bank/ post office that she has attained majority via the conversion form. “When the girl child turns 18, she has the option to take control of the account and make contributions herself. In such a case, she can avail of tax benefits under Section 80C,” says Adhil Shetty, CEO, Bankbazaar.com.
Transfer shares to new demat account
If you had opened a demat account in your child’s name for trading securities, it will now become inactive. She has to open a fresh demat account, says Shetty. “The account holder must confirm the balance in their account, and any shares held in the deactivated account will be transferred to the new account. The child must operate the account once she attains the age of 18 years,” he explains. Your child will also have to sign a new agreement with the depository participant and link the new bank account to the trading account.
Start of a new journey
* Link the PAN number to every account/financial asset your child owns
* Remember to add a nominee everywhere as you undertake the conversion process
* Keeping all accounts and assets updated with the latest personal details will ensure a smooth start to your child’s wealth creation journey