Minor Accounts Question: Can a Minor open a deposit account? Answer: Yes. A Minor can open a deposit account. The Texas Finance Code specifically removes the disability of Minority for a Minor that is acting as the sole and absolute owner of an account. See Finance Code Sec. 34.305. Question: Who should sign the signature card? Can it be a joint account? Answer: Only the minor should sign the account as the sole and absolute owner of the account. The Texas Finance Code does not provide for a multiparty account with a minor. Question: What happens to an account when a Minor dies? Answer: The funds in the account become the property of the estate of the minor. Question: Can a parent or legal guardian prevent a Minor from making withdrawals from an account the Minor holds as the sole and absolute owner of an account? Answer: Yes. See Finance Code 34.305(c): A parent or legal guardian of a Minor may deny the Minor's authority to control, transfer, draft on, or make a withdrawal from the Minor's deposit account by notifying the bank in writing. On receipt of the notice by the bank, the Minor may not control, transfer, draft on, or make a withdrawal from the account during Minority except with the joinder of a parent or legal guardian of the Minor. Question: Can a Minor apply for a debit card? Answer: That is an issue for the bank to decide as there is no state or federal rule or regulation that is on point. However, the Texas Finance Code noted above says the bank may otherwise act with respect to the account on the order of the Minor. So it would seem a Minor could order a debit card.
Question: Can a Minor opt in to an overdraft protection plan? Answer: That is difficult to see how a Minor could contract for an overdraft protection plan. See 34.305(d) for the exception on the inadvertent extension of credit This subsection does not apply to an inadvertent extension of credit because of an overdraft from insufficient funds, a returned check or deposit, or another shortage in a depository account resulting from normal banking operations. The opt in to an overdraft protection plan appears to go beyond the inadvertent extension of credit exception in the statute. Question: Can a Minor name a POD beneficiary? Answer: No. The statute noted above does not provide for the Minor to name a POD beneficiary. Question: We opened an account with a parent and a minor child as multiple party account with right of survivorship. It was designated as minor as not authorized to sign. It was titled: Johnny Doe, Minor by John Doe or Jane Doe. Was this appropriate? Answer: Minor by accounts, as they are called, are used in financial institutions across Texas, but they are not expressly authorized in the statutes. Their wide use doesn t make them appropriate. The problem is that there are no rules governing these accounts. What would you do if the child s parent asked for the money in a minor-byaccount. The money is owned by the child at least according to the style of the account. I think that most banks allow the parent to spend the funds for whatever they want (regardless of whether it benefits the minor). There certainly aren t any rules that require the parent to spend the money for the child. So, if the parent spends the funds, how do we know that they didn t just put their own money in the child s name to evade taxes or evade child support or evade something else. It s just a rumor, but I ve heard that the IRS considers minor by accounts as tax evasion. Another issue: What if the minor comes in and complains that you allowed the parent to take their money and use it for the parent s purposes. We do not recommend using these accounts. Question: Do CIP rules apply when establishing an account for a minor?
Answer: Yes CIP rules apply to minors just like they would any bank customer that opens an account. A bank s risk-based policy may allow a minor to use a student identification card or other means to establish identity. Question: What Taxpayer Identification Number should be used with a minors account? Answer: If the account is an account opened with the minor as the sole and absolute owner, the social security number of the minor should be used. If it is a joint account, it should be the social security number of the actual owner of the funds. Texas Uniform Transfer to Minors Act Accounts Question: When does ownership transfer to a Minor when an account is opened under TUTMA? Can a gift to a Minor be reversed? Answer: Ownership transfers when the account is established. Once a gift is made to a Minor under TUTMA, it can t be reversed. Question: How should a TUTMA account be styled? Answer: The account should be setup as a custodian for account Account documents should read Robert Smith, Custodian for Billy Smith, Under TUTMA In the processing system or platform, the following setup should be used. Line 1 = Billy Smith, a Minor Line 2 = Robert Smith, Custodian, Under TUTMA Using that setup allows you to use the TIN of the Minor (usually tied to Line 1 in a processing system or platform). The TIN of the Custodian should not be used. Question: Can a Minor be a signor on a TUTMA account? Answer: No. Only the Custodian should be a signor on the account. Question: Can a TUTMA account have a POD beneficiary?
Answer: No. A Minor can t designate a POD beneficiary and neither can the Custodian on behalf of the Minor. If the Minor dies before reaching the age of 21, the Custodian is expected to pay the funds to the estate of the Minor.. Question: Can a Custodian pledge a TUTMA account to secure a loan? Answer: Usually in a fiduciary relationship the custodian has what is called naked possession. That means that the custodian has possession of the asset but not ownership and to pledge as security takes ownership. If you have a loan secured by a TUTMA account you have an unsecured loan. The specifics of TUTMA accounts are in the Texas Property Code Chapter 141. However, that same chapter of the property code has a provision that says that the custodian can use the property as he/she would use his/her own property as long as it is for the benefit of the minor. Does that mean that they custodian could secure a loan for the minor with the TUTMA? Question: When can the Minor receive the funds from a TUTMA account? Answer: The funds in the account should be paid by the Custodian to the Minor when he / she reaches 21. The bank is not required to pay out to the Minor after he / she turns 21 and should contact the Custodian or send a check to the Custodian for the benefit of the Minor. If the funds were transferred to the TUTMA under Texas Property Code Sec. 141.005 (irrevocable gift to or irrevocable exercise of power of appointment in favor of, a custodian for the benefit of the minor) or 141.006 (irrevocable transfer by will or trust to a custodian for the minor s benefit), then the custodian must transfer the 141.005 and 141.006 property in the TUTMA to the minor when he/she attains the age of majority under the laws of Texas (which is the age of 18). Question: Must a TUTMA account be a savings account? Answer: Chapter 141 Transfers to Minors of the Texas Property Code does not define the type of account eligible. It can be established as a savings account or a transaction account (i.e a checking or money market account). Question: We have two minor TUTMAs which one minor is 13 and the other is 18. The custodian is the father who is incarcerated and the mother has POA for the spouse.
Can this be done on these accounts? The mother would like to take control of the accounts. Answer: No, the father cannot give another person a POA to be the custodian of this account. The father could resign as custodian and designate the mother custodian. See Property Code 141.019(b). Question: Does Texas Property Code Section 141.019(d) (Texas Property Code, Chapter 141. Transfer to Minors) mean that if the custodian passes away, the child is under 14, and there is no successor custodian, that we can allow a parent of the child/guardian to become the custodian? Answer: Actually, the law mandates that the minor s guardian becomes the custodian unless the guardian declines to serve. The law says that when a custodian is ineligible, dies, or incapacitated, a child 14 years of age or older can name their guardian, a family member, or a trust company as successor custodian. If the child is younger than 14 (or if a child 14 years or older fails for 60 days to name a custodian), the guardian is the custodian, unless there is no guardian or the guardian declines. If there is no guardian or the guardian declines, the last sentence of 141.019(d) details who can petition the court to designate a successor custodian. Question: If a custodian dies and the custodian did not designate a successor custodian, can the minor (who is 18) convert the account from a TUTMA to a regular savings account. This minor is also the executor of the custodian s estate. The custodian was the minor s father. Answer: The problem with that is that although he is 18 and generally that is the age when a person is no longer a minor, a TUTMA custodianship does not terminate until the minor attains the 21 years of age. (See Texas Property Code, Sec. 141.021) So a minor could neither convert a TUTMA account to a regular savings account nor appoint himself as custodian of the TUTMA. However, he could appoint another adult as custodian according to the Texas Property Code, Sec. 141.019(d). Question: If a we have a UTMA account and the child reaches 21 and the funds have not been transferred to them does the bank need to require a court order or direct request from the successor custodian or does the age automatically terminate this custodianship?
Answer: Unfortunately, the Property Code Chapter 141 does not address this; it merely states that the custodian shall transfer the custodial property to the minor or the minor s estate on earlier of their 21st birthday or, when the property was put into the TUTMA according to Section 141.007 or 141.008, when the minor attains the age of majority (18). Because the minor is 21 years old, and is the owner of the funds, I would contact the minor to let them know about this termination provision in Sec. 141.021. The 21 year old can then decide whether to push the custodian to honor his rights. If a fight ensues, with you in the middle, you can always threaten to just submit the funds to the registry of the court for the court to decide who gets the funds. The bank will get its attorneys fees paid for submitting the money to the court the court can determine whether the custodian has to pay those attorneys fees. If the custodian doesn t honor 141.021, I d hope the judge assesses the fees on him or her, if the law allows. Question: A TUTMA account was set up for a minor. We ve been asked to issue debit cards for the custodian and for the minor. Can we do either? Answer: We do not see an issue with issuing a debit card for the custodian because the custodian is supposed to control the funds in the account until the minor has attained the age of 21 years. However, the minor should not have a debit card or any other means of accessing the funds in the account because minors are not allowed to have any control over funds in TUTMAs until the age of 21 years.