New Account: Creating an Account to Benefit a Minor

by Mary Beth Guard
Guru BIOS

Question: One of our branches had a customer whose husband had drowned in the lake. The widow wanted to set up an account for her son, who is 7 year old, so people could deposit to it for his future. I would like to have some firm guidelines to go by when this type of question comes up.

Answer: In this type of situation, where the funds are to be used for the benefit of a living child, probably the most expedient way to set up the account, with the most protections for the child and the financial institution, is under the Uniform Transfers to Minors Act ("UTMA"), with the mother (in the example you gave) serving as custodian. The UTMA would require the custodian to use the funds for the use and benefit of the minor, rather than for the custodian's personal benefit. If the funds are misused by the mother, the child will have a right to sue. The responsibility is placed on the custodian, rather than the financial institution, to use the funds in accordance with the statutory requirements.

The original version appeared in the June 2004 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 1/10/05