Savings Accounts for Minors

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Question:

In the past, we have allowed grandparents to open savings accounts for their grandchildren with the grandchildren being the primary owners and the grandparents as secondary. They would have the child's social security number. They would sign the child's name,(child is unable to sign due to age). Relative to CIP purposes can this still be done?

Answer:

It never was a good practice, and CIP hasn't made it any better. A child who is too young to print his or her name is certainly not able to enter into a binding contract. The contracts you set up with the grandparents aren't any more valid than if I opened an account for Ken Golliher in your bank and signed his name to the signature card.

There are ways to properly set up accounts for kids. They can be POD or Totten Trust accounts naming the child as beneficiary (of course these aren't actually the kids' accounts until the true owner dies, assuming no change is made to the beneficiary status), or they can be established under your state's UTMA. I have no doubt concerning the motives of the bank or the grandparents when setting up accounts as you have done in the past, but the fact that you perhaps haven't run into problems with any of these accounts so far should not be taken as a sign that what you've been accepting is correct.

First published on BankersOnline.com 10/04/10