Everything You Should Know About Demat Account for Minors

A person needs to have a demat account to own a company’s shares. A Demat account can be created with a depository participant. The shares of a Demat account are held in a paperless format. You can also create a Demat account for minors. But the minor cannot purchase or sell shares. The shares in a demat account need to be gifted by a legal guardian. Keep reading to find out more about demat accounts for minors.  

Documents Required to Create Demat Account for Minors

A Demat account for minors needs to be opened by a parent or legal guardian. The following documents need to be submitted:

• Account Opening Form including details of the minor as well as the guardian
• Two KYC forms were filled out by the minor and the guardian
• PAN card of the minor and the guardian
• Identity proof document as specified by the depository participant
• Address proof as determined by the depository participant
• Birth certificate of the minor
• Details of a bank account held jointly by the minor and the guardian

Limitations of a Demat Account for Minors

There are some limitations for minor Demat account uses online. A minor Demat account is only suitable for making delivery orders. Other trades in equity derivatives, currency derivatives or equity intraday segments cannot be made from Demat accounts for minors. A minor Demat account cannot also be linked to any online trading account. It cannot also become a part of a joint Demat account. 

What Happens if the Legal Guardian of the Minor Demat Account Dies?

The steps to follow in case of the death of the legal guardian of the minor Demat account are as follows:

• The original or a copy of the death certificate of the legal guardian needs to be submitted. It should be attested or duly notarized.
• The depository participant will have to freeze the minor’s account as long as a new guardian does not complete all the formalities. 
• The new guardian has to fill up the KYC form account opening form and submit all the required documents to become a guardian to the minor’s Demat account. 
• All details about the deceased guardian will be removed from the Demat account of the minor. 

What Will Happen After the Minor Turns 18?

If the word ‘minor’ was present with the account holder’s name, the account needs to be closed. A completely new Demat account will have to be created. Therefore, it’s a good idea to not include the word ‘minor’ while opening the account. Without the word ‘minor’ present in the account holder’s name, you will only have to submit the following once the minor becomes an adult:

• New account opening and KYC form
• Signed Right and Obligations document

The depository participant will delete the guardian’s details and replace the guardian’s signature with that of the original account holder.

Ending Note

A Demat account for minors prevents you from trading. So, it can be an excellent investment for your child’s future. Once the child becomes an adult, he or she will be able to manage the assets. So, with all the information, it will be  easy for you to open a demat account for minors.