Ownership When Parent Opens a Minor Account

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Question:

When a parent opens an account for a minor and uses the minor's Social Security number, but only the parent signs on the account, is the ownership of the account joint or individual?

Answer:

Why would you allow such an account-opening process? The minor can't contract for the account in many states, and certainly cannot contract if the kid can't even sign his/her name! The parent is not a legal guardian without a court's blessing, and cannot contract in the name of the child, either. The FDIC would also have problems with its determination of ownership for insurance coverage.

Unless your state recognizes deposit accounts for minors (and even if it does, when the minor is too young to sign the deposit contract), parents can open POD or Totten trust accounts in their own names, naming the minor as the beneficiary. They can also open an account under your state's UTMA statute, assuming the role of custodian.

First published on BankersOnline.com 07/18/05