Does a custodial account for a minor have to be opened as a FLUTMA or can it be a simple custodial account? If so, what would govern it?

We should not be telling our customers how to set up accounts; they should be telling us what they want particularly as related to trust and custodial relationships. Otherwise, we could be venturing out on a very slippery slope in providing financial planning advice.

If a customer has a custodial document, such as a court order, it should be followed. If a customer is wanting to create an account to house monies for a minor under the FLUTMA laws, we should follow those rules.

If the bank is wanting to allow for other types of accounts with/for minors, the appropriate laws should be researched and decisions made as to the procedures that will be followed. Will you allow a minor to own an account? If so, at what age? Will you limit it to only savings accounts, or also allow them to have a DDA? Will you require an adult on the account? Review the risks and determine your risk tolerance.

It can be very confusing, but it is so important to make sure that everyone is reading from the same page, Without specific guidance there is no end to the creative account ownership structures you may see.

A custodial relationship must be established by some act of law - whether it be FLUTMA or a court documentation. I'm unsure of what you mean by a "simple custodial account".

Back in the day, we used to open "Minor By" accounts.

Example:

Johnny Smith, Minor
By Jane Smith

After attending Ken's Deposit Administration program we made a change and will offer minor accounts only under the FLUTMA statute. It takes away all the guess work when something happens to the custodian as well as the transfer of funds to the minor.

Again, we should be establishing a FLUTMA at the request of the customer. We should NOT be making that decision for them. Monies in this type of account represent an irrevocable gift to the minor and there can be consequences for misuse of the money by the custodian. If our procedures are not adequate, particularly as related to DDA accounts, the bank can end up with issues as well.