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#1662637 - 02/09/12 04:05 PM
UTMA Concern!
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Platinum Poster
Joined: Feb 2007
Posts: 597
Central Texas
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One of our branches sent us copies of wires that they had done for one of our UTMA accounts.
They wired money from it to a personal account of the custodian. I say that we could be held responsbile if something ever comes up on this because we knew where that money was going and it is defintely not for the benefit of the child, it is the custodians business account.
We are in Texas. Does anything see it any differently than I do?
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#1662651 - 02/09/12 04:25 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Jul 2001
Posts: 84,170
Galveston, TX
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"I say that we could be held responsbile if something ever comes up on this because we knew where that money was going and it is defintely not for the benefit of the child"
How do you know? If the transfer was ordered by the custodian, that is your only responsibility. It will be the custodian that is on the hook.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1662662 - 02/09/12 04:20 PM
Re: UTMA Concern!
Happy Drugs
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Power Poster
Joined: Oct 2009
Posts: 3,927
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Agree with Randy. We try not to presume anything and the custodian is the responsible party!
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I hear and I forget. I see and I remember. I do and I understand.--Confucius
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#1662785 - 02/09/12 06:16 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Aug 2001
Posts: 21,939
Next to Harvey
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I'll dissent here.
If the custodian wrote a check on a UTMA to his business there would not be much you could do about it. With a wire, you're involved and, in my opinion, well aware of the breach.
What's done is done, but I would write the customer a letter confirming the wire information and drawing it to his attention that it came from the UTMA account "...just to make certain that was what was intended." I don't want him coming back "X" years in the future and saying we made a mistake and: "I would have never taken money from that account for my own use!"
In addition, it would not happen again...
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#1663301 - 02/10/12 03:29 PM
Re: UTMA Concern!
Elwood P. Dowd
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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As add as it sounds, I'll agree with Randy here - and maybe this varies some by state - but (in Texas) our interpretation is that the custodian can do anything with the funds and answer only to the IRS during an audit, should one occur - or to the minor at age of majority. Our contract is with the custodian and we are not account monitors. I will agree with Ken in the fact that with a wire we would definitely have the review opportunity - but I don't think that is our responsibility (due monitor account use).
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#1663401 - 02/10/12 04:47 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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Section 16 of my state's (Massachusetts) UTMA says third parties dealing in good faith with the custodian, in the absence of knowledge, is not responsible for determining ... the propriety of the application of any property of the minor delivered to the custodian. That suggests that the bank would have to be innocent of the fact the funds were transferred to the custodian's benefit in order to escape any form of accountability. Even if a bank could be insulated from liability, that doesn't mean it has to ignore a problem that's in its face. I'm in Ken's camp on this question.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1663619 - 02/10/12 07:44 PM
Re: UTMA Concern!
Happy Drugs
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Power Poster
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
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FWIW - I agree that the bank is not responsible to ensure that all money in UTMA accounts are being used for the benefit of the minors by the custodians. It is the custodian's responsibility to understand and adhere to his/her fiduciary duties.
That being said, if circumstances are such that the bank is faced with a set of facts that would, in the mind of a reasonable person, raise red flags as to potential misuse of the money by the custodian, I think the bank has an obligation to take additional steps.
In this case, I think it would be reasonable to question the use/purpose of the transfer and take a closer look at the account to ensure there is no other evidence of unusual or suspicious activity. Kudos to the branch staff for being proactive!
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#1663898 - 02/12/12 01:35 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Jul 2001
Posts: 84,170
Galveston, TX
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Hmmm... I'm having trouble finding lawsuits in which the bank was named. Any help on that?
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1663899 - 02/12/12 03:24 PM
Re: UTMA Concern!
rlcarey
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10K Club
Joined: Aug 2001
Posts: 21,939
Next to Harvey
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Generally, only appellate decisions are published and can be cited as precedents. Who knows, assuming you searched diligently, it could be that every bank who lost a UTMA related suit was smart enough not to appeal and thus guarantee press coverage. The one where I was deposed as an expert witness on the UTMA was settled the day after the bank received its copy of the deposition. Settlements are obviously not publicized.
It's hard for many bankers to theorize exactly how it is they are going to get sued by a 6 year old or an adult 12 years later. In my limited personal experience, it was when mom and dad got a divorce and mom realized the UTMA account on which dad was custodian was gone or had been looted. She either told the adult child or brought suit on behalf of the minor child. Both of those were settled, but not in the bank's favor.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.
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#1668837 - 02/23/12 03:44 PM
Re: UTMA Concern!
Happy Drugs
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Power Poster
Joined: Jul 2003
Posts: 2,675
Austin Texas
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If you're in Texas, legal counsel for TBA just answered this very same question a couple of weeks ago.......in their weekly newsletter.
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My comments are absolutely no reflection of, nor influenced by, my employer - take them at your own risk.
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#1669843 - 02/24/12 11:17 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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I don't see that the TBA opinion is out of line with other comments here. It doesn't address what the bank ought to do when it has facts in its face that point to misuse of the funds.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#2287300 - 08/02/23 04:12 PM
Re: UTMA Concern!
Happy Drugs
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10K Club
Joined: Jul 2001
Posts: 84,170
Galveston, TX
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I have never heard of doing so. You could file a SAR if it meets the dollar thresholds. I think your only other option is to call your state child protection agency/other similar department and just ask them this general question to see if they have any interest in such a situation or even have any jurisdiction over such a situation before sharing any specific information.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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