opening minor accounts - oncourse learningttsmedia.ttstrain.com/minorsdg101415.pdf · an account...

10/14/2015

1

©Gettechnical Inc. 1

The material used in this text has been drawn from sources believed to be reliable. Every effort has been made to assure the accuracy of thematerial; however, the accuracy of this information is not guaranteed. The laws are often changed without prior notice from the government.The publisher and the editor are not engaging in the practice of law or accounting. We are not responsible for the actions of your company'semployees.

Opening Minor Accounts

Instructor Deborah L Crawford • Debbie is the President of

Gettechnical Inc, a Baton Rouge based training company. Her combined banking and training experience began in 1984 and she is a deposit side expert. She received her Bachelors and Masters degrees from Louisiana State University.

• If you have any questions just call 1‐800‐354‐3051 or email us at [email protected].


10/14/2015

2

3

MEETING YOUR customer

The Customer Identification Program (CIP) of the bank cannot be waived. It is a violation of the Bank Secrecy Act. If your policy allows you to delay documentation and other verification procedures, then you must also include procedures to close

accounts and then to file Suspicious Activity Reports. Some banks make copies of the required documents and make notes on them

and some banks use a CIP Worksheet.

4

10/14/2015

3

Risk Management (Anti‐money laundering procedures)

• Most banks now include not only a CIP Worksheet, but also a questionnaire for anti‐money laundering. This questionnaire would address “high risk” questions such as type of business, location, and purpose for opening account at bank.

5

OFAC

• The Office of Foreign Assets and Control list should be checked periodically at your bank. It is important to run OFAC in the opening process on all parties to the account including signers and beneficiaries.

6

10/14/2015

4

CUSTOMER IDENTIFICATION PROGRAM (CIP): PURPOSE

• The regulations are added to the Bank Secrecy Act in an attempt to deter terrorism and money laundering. These regulations require all financial institutions to implement a Customer Identification Program.

7

At a minimum, the regulations require financial institutions to implement reasonable procedures for:

• Verifying the identity of any person who opens an account to the extent reasonable and practicable;

• Maintaining records of the information used to very the person’s identity, including name, address, and other identifying information; and

• Determining whether the person appears on any lists of known or suspected terrorists of terrorist organizations provided to the financial institution by any government agency.

8

10/14/2015

5

CIP DEFINITIONS

“Customer means:

a. A person that opens a new account; and

b. An individual who opens a new account for:

1. An individual who lacks legal capacity, such as a minor; or

2. An entity that is not a legal person, such as a civic club.”

9

CIP DEFINITIONS

Customer does not include:

a. A financial institution regulated by a Federal functional regulator or a bank regulated by a state bank regulator;

b. Phase I exemptions for CTRs or

c. A person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of the person.”

10

10/14/2015

6

11

Legal Ownership

12

10/14/2015

7

MINOR ACCOUNTS

13

Most signature cards have five basic components:

1

OWNERSHIP

2

TITLE

3

FEDERAL REGULATIONS

5

TAXPAYER IDENTIFICATION NUMBER

4

SIGNATURES (Access)

14

10/14/2015

8

Signature cards must be consistent.

15

Ownership

Single Party or Individual

Multi Party or Joint

Trust

______________

Title

Signatures

Must Match

Must Match

Some signatures add special features.

16

POD/ Trust

Name of Beneficiaries

Number of Signatures Required

1 2

Agents or Authorized Signers

Some signature cards allow signers (as permitted by card) on individual or joint accounts.

Some signature cards allow a 2 signature requirement.

POD pay at death to the list of beneficiaries.

Only put on personal accounts.

10/14/2015

9

SIGNATURE CARDS: GENERAL ISSUES

• Signature cards, accompanying terms and conditions, and deposit account agreements all comprise your institution’s agreement with your customer. These cards or agreements may be purchased from vendors or written by your own financial institution’s legal or compliance department. This is a legal binding contract between you and your customer.

17

• You must follow your institution’s account agreement. You must not alter, erase, whiteout or delete any parts of the card. You must not type in additions to the card!

18

10/14/2015

10

Ownership Versus Access

• It must be clear on your signature card who owns the funds and who has access. Some accounts by definition, the owner has no access (for example UTMA). Some accounts have signers who have access, but no ownership (for example agents, authorized signers).

19

• Common mistakes include joint or multi‐party accounts, having the title and ownership box different from the signatures, and accounts checked single party who have many signers.

20

10/14/2015

11

Summary: Basic Accounts

OPTION #1UTMA(Fiduciary Account)Set up by a custodian for a child. One child and one custodian on the account. Established and protected under state law. The childis the owner and the adult has the access. The custodian will turn over the funds to the child by age 21. The custodian can use thefunds all during the period for the child's benefit.My bank does/does not offer UTMA accounts.

OPTION #2MINOR BY ACCOUNTS (Similar to UTMA—lacks legal protection)An account set up similar to the UTMA accounts. These have no state or regulatory protection. They are not described in signaturecard contracts. A practice by many banks.NOT RECOMMENDED

OPTION #3MULTIPLE‐PARTY ACCOUNTS WITH MINORSAccounts where one of the parties to the account is a minor. Usually the minor's name is established first on the signature cardcontract. Many institutions add protective language to their deposit agreements for these accounts or have the parents on the jointaccount sign a separate agreement in which they agree to be responsible for the child's activity on the account.My bank does/does not offer multi‐party accounts with minors.

OPTION #4POD/TRUST ACCOUNTSample: Parents ITF or POD ChildIntention for funds to belong to child at death of owners.My bank does/does not offer POD accounts where the beneficiary is a minor.

21

Summary: Basic AccountsOPTION #5MINOR ONLY ACCOUNTMinors in some states can open accounts on their own. Consult bank’s attorney on writing procedures on this issue.My bank does/does not allow accounts where minor is alone on contract.Consult bank's attorney in writing procedures on this account.

OPTION #6

SOCIAL SECURITY REPRESENTATIVE PAYEE ACCOUNT

Ordered by Social Security to name someone to act for the owner or beneficiary of the funds. Owned by the child and signature card issigned by representative payee.

My bank does/does not have representative payee accounts.

OPTION #7GUARDIANSHIP ACCOUNTOrdered by the court the guardian acts for a child. Child owns the funds the guardian is a signer. The guardian has legal paperworkfrom the court.My bank does/does not have guardianship accounts.

OPTION #8COVERDELL EDUCATION SAVINGS ACCOUNTOwned by the child. This account is set up by a Depositor and managed by the Responsible Party for the child. Is set up on a separatetrust agreement.My bank does/does not have CESA

22

10/14/2015

12

23

When one person is named legally to act for another

Coverdell Education Savings Account

UTMASocial

Security Rep. Payee

Guardianship

Responsible Party acts for

child

Set up by 5305-EA contract

Signer is the responsible party

Custodian acts for child

Set up by state law and

signature card

No other signers allowed

Rep. Payee acts for beneficiary/

owner

Set up by Social Security


Guardian acts for minor

Set up by court


UNIFORM TRANSFER TO MINORS ACT

• Under the Uniform Transfer to Minors Act (UTMA), a custodian may want to set money aside for the minor as an irrevocable gift. In this case, the money belongs to the child. If the custodian withdraws any of the money it must be used for the benefit of the child or the child may sue. Upon the age of majority (18‐25 in most states), the funds will be turned over to the child.

24

10/14/2015

13

In my state the age for UTMA transfer is 18/21.

At my bank we do/do not have UTMA accounts.

At my bank we do/do not have a form or place on signature card for successor custodian.

25

UTMA

• Only one custodian and one child are allowed per account in most states, but some states will have two custodians. In the event of the death of the child, the child's estate will receive the funds. In the case of the death of the custodian, the guardian of the child will name a successor custodian. Since this account is a fiduciary account, we do not have authorized signers, agents, convenience signers or payable on death designations. Again, this may have an exception under state law.

26

10/14/2015

14

Step #1:

• Custodian sets up an account for a child at a bank.

$

27

Step #2

• Custodian makes deposits and withdrawals at the bank for the child

$

28

10/14/2015

15

Step #3

• Custodian gives the child the money (if any left) at age dictated by state law (usually 18‐25)

29

Who is the Customer?

30

Run CIP on the custodian who is acting for the child if the child lacks

legal capacity

If child has legal capacity but is still under UTMA age, CIP the child

As a practical note:

It is best to get as much information as you can on both. Then you are

always in compliance.

10/14/2015

16

Uniform Transfer to Minors1. Required Information on Custodian:

(Before opening account)

Name Address For individuals, date of birth Taxpayer identification number

U.S. Person will be social security numberNon U.S. Person will use passport number, ITIN number or other acceptable document number

2. IRS Reporting: Report in child’s SSN

3. Documentary Requirements:

(Reasonable time after opening)

Signature card signed by the custodian

Valid identification on custodian. Children may not have primary identification. You might accept a social security card and a birth certificate or student identification for the child.

4. Suggested Non document Verification:


A CIP program must also have non documentary verification. Suggestions include:

Welcome letter Call to customer to thank for business Third party verification Previous bank references

31

Uniform Transfer to Minors5. Account Styling: Little Johnnie a minor by Sally, custodian under UTMA

OR

Sally as custodian for Little Johnnie, minor under UTMA

(You must report in child’s social security number)

6. Consult Government Lists: Section 326 List OFAC List

7. FDIC Insurance: Insured under child’s individual insurance for up to $250,000.

8. Miscellaneous: One child and one adult per account in most states, but there are some states who have two custodians.

You cannot use as collateral for a loan

At death, there may be a successor custodian if not and the child is 14 he or she has 60 days to name a custodian out of their family, if this lapses then the guardian or other parent of the child becomes the new custodian. See state law.

You cannot have an “agent” on a custodial account. You may see a state with an exception here in its law.

You may not put a POD on a custodial account.

32

10/14/2015

17

Checklist for UTMA Account

Required information: Need both minor and custodian

Report to IRS in Social Security Number of minor

Valid identification on custodian

Nondocumentary verification

Signature Card

Account styling: Little Johnnie minor Sally Smith,custodian under UTMA

Government lists

33

DIFFERENCES BETWEEN UGMA AND UTMA

UNIFORM GIFT TO MINORS ACT UNIFORM TRANSFER TO MINORS ACT

Type of Property

Cash, securities and life insurance

Type of PropertyNo restrictions—i.e., real estate, limited partnership interests,tangible personal property, patent royalties, copyright royalties,and oil and gas royalties, etc. plus the cash, securities and lifeinsurance you can put in a UGMA

AgeCustodianmust release the funds to the minor at age 18

AgeCustodianmust release property to minor at age 21

"Gifts"The UGMA is restricted to lifetime gifts made by the donor tothe custodial account

"Transfers"Includes both transfers to the custodial account as well as gifts tothe custodial account. For instance, transfers made to the minorunder a will or funds received by debtors as well as proceeds of thelawsuit

"Powers of Custodian"Investment powers largely passive

"Powers of Custodian"The custodian has broader investment powers and can invest withsame skill and care as would a prudent person with his\her ownproperty

34

10/14/2015

18

UTMA at DEATHSubject to State Law

Child Dies

Custodian Dies

Funds go to the child’s

estate

Documentation1. Death Certificate2. Letters of

Administration orLetters of Testamentary

Did custodian name successor?

NO

Successor custodian takes over as custodian

If child is over 14 and acts in 60 days may name own custodian subject to state law

If not, then legal guardian becomes custodian

Documentation1. Death Certificate on custodian2. Identification on new custodian3. New signature card

YES

35

Access

Many problems spots on multi‐party accounts where the minor did not

sign.

36

10/14/2015

19

MULTI‐PARTY ACCOUNTS WITH RIGHTS OF SURVIVORSHIP JOINT

AND NOT AS TENANTS‐IN‐COMMON

• Joint tenancy with rights of survivorship is a way to jointly own real or personal property. When two or more people place property as joint tenants, and one of the owners dies, the other owners automatically become owners of the deceased owner's share.

37

MULTI‐PARTY ACCOUNTS WITH RIGHTS OF SURVIVORSHIP JOINT AND

NOT AS TENANTS‐IN‐COMMON • Placing property in joint tenancy is a common way to avoid probate. However, when property is placed in joint tenancy, a gift is made to any persons who become owners as a result. Thus, if Tom has a certificate of deposit and puts his son on as a joint owner with rights of survivorship, he has made a gift of one half of the property.

38

10/14/2015

20

MULTI‐PARTY ACCOUNT WITHOUT RIGHTS OF SURVIVORSHIP

AS TENANTS IN COMMON

• At death of party, deceased party's ownership passes as part of deceased party's estate. None of the owners intend by opening this account to create any right of survivorship in any other party. For instance, if John and Karen open a joint account WOROS, then at John's death the funds do not automatically transfer to Karen for ownership. She will have access to these funds until the estate is settled.

39

My bank does/does not offer multi‐party accounts with minors.

At my bank the minor signs/does not sign the signature card. If the minor does not sign the signature card, we have the following procedures in place to prevent the minor from receiving the funds.

Note: This is never a good practice to have minors on joint accounts without them signing the signature card.

If we do:

We require a family member on the account.

We require the minor to be _____ age.

We require ________________identification on the minor.

We do/do not let minors have checking accounts.

We do/do not let minors have debit cards.

We do/do not let minors have checks.

We do/do not let minors have multi‐party accounts without signatures.

At my bank, if the adult dies and only a minor is left on the accounts, we do/do not have procedures in place to handle this situation.

We do/do not allow minors to be on all types of deposit accounts. If we do not, what are those restrictions and are they documented in our procedures.

40

10/14/2015

21

MISCELLANEOUS MULTI‐PARTY ACCOUNT ISSUES

41

Close The Account

• When a joint owner wishes to end the joint account holder relationship, the best way is to have the joint owner remove the funds and close the accounts.

42

10/14/2015

22

Joint Owner Removes Himself or Herself

• You may also allow (subject to your institution's policy) a joint owner to remove himself or herself. They may do this by written authorization. Some institutions provide their own document and require all joint owners to sign before they will remove any one owner.

43

• Do you want an adult removing himself or herself and leaving a minor alone?

44

10/14/2015

23

Agents on Joint Accounts

• You may have an agent on a joint account if it is permitted on your signature card. Sometimes these are “in‐house” powers of attorney which may be on the signature card or attached by a separate agreement. All owners need to sign the signature card contract agreeing to the agent.

45

Outside Power of Attorney

• Many institutions accept outside Powers of Attorney (POAs). Since these documents are highly risky you should consult your bank’s legal counsel before accepting. You will also need to consult counsel before allowing the POA to change the ownership.

46

10/14/2015

24

Multi‐Party Account

1. Required Information on Persons Account:(Before opening account)

Name Address For individuals, date of birth Taxpayer identification number U.S. Person will be social security number Non U.S. Person will use passport number, ITIN number or

other acceptable document number

2. IRS Reporting: Report in SSN of 1st Owner

3. Documentary Requirements:(Reasonable period after )

Valid Identification on all owners

Signature card signed by all owners(Some signature cards permit an agent on a joint account, if so you will have to have the agent sign)

On a minor you should require some form of ID outlined in your CIP. Examples: Student ID, birth certificate, or social security card.

4. Suggested Nondocument Verification:(Reasonable period after )


Welcome letter Call to customer to thank for business Third party verification Previous bank references Whitepages.com

5. Account Styling:John Smith or Mary Smith (You should not have “and” accounts in joint ownership)


47

Multi‐party Account

7. Insurance:

$250,000 per joint owner this would include their share of any other multi‐party account balances at your bank. The FDIC only insures joint accounts if the owner has personally signed the signature card (except CDs), all owners are natural persons, and all owners have equal access.

8. Miscellaneous: All joint owners must sign the contract.

48

10/14/2015

25

• You should review your minor accounts with legal counsel and make sure that your attorney is informed with the way you open accounts. You should not make up styles of ownership because it is a “kid’s” account. You should stay in the legally recognized stylings of your state and your account agreement.

49

\

• Many institutions open joint accounts with minors where the minor never signs his or her name. Remember, when you engage in these types of practices, the child cannot get access to the funds, and technically you can argue that it is not a joint account.

50

10/14/2015

26

On joint accounts where the minor never signs the account card, be sure to ask your

attorney these questions:

• What happens in our state if we give access to the funds to a person who never signed the signature card?

• What happens if the owner who signs dies and the child never signed the card?

• Is the child a customer of the bank if he or she has not signed the account agreement?

• What happens if another parent who did not sign the card brings in the child and withdraws the money without the child being a signer on the account?

51

Checklist for Multi‐party Accounts

Required information on all owners

IRS reporting on 1st owner’s SSN

Valid identification on all owners

Nondocumentary verification

Signature Card

Account Styling: John Smith or Mary Smith

Government lists

Note: You must run your CIP on all owners on a joint account.

52

10/14/2015

27

TESTAMENTARY REVOCABLE TRUST/PODs

• A testamentary trust is an account that evidences an intention that the funds shall belong to a named beneficiary upon the death of the owner(s) of the testamentary account. In this account the grantor/settlor is also the trustee. These accounts are sometimes known as tentative or "Totten" trust accounts, pay on death accounts OR revocable trust accounts. Created by use of a signature card contract, the trustee(s) is the only signer on the account and at death the funds pass to the beneficiary. The owner(s) of the account can change beneficiaries by signing a new signature card contract.

53

TESTAMENTARY REVOCABLE TRUST/PODs

• You will sometimes see minors as beneficiaries of trust/POD accounts. Some state laws restrict giving the funds to the minor at certain ages. Even if the state law does not restrict paying minors at the death of the owners, your legal counsel may have some strong feelings about it.

54

10/14/2015

28

My state does/does not restrict paying minors on the death of the account.

My bank does or does not have procedures in place in case the beneficiary is a minor.

55

Testamentary Trust/POD Accounts

1. Required Information on Persons Account:



U.S. Person will be social security number Non U.S. Person will use passport number, ITIN number

or other acceptable document number

2. IRS Reporting: Report in SSN of 1st Owner


(Reasonable period after )

Valid identification on owners

Signature card signed by all owners


(Reasonable period after )

A CIP program must also have nondocumentary verification. Suggestions include:


56

10/14/2015

29

Testamentary Revocable Trust/POD Accounts

5. Account Styling:

You must list the beneficiaries on the signature card.

John Smith or Mary Smith POD

OR

John Smith POD Betty Smith, Sally Smith and Tim Smith


7. FDIC Insurance: $250,000 per beneficiary per owner.

8. Miscellaneous: No outside trust documents required

57

Checklist for Testamentary Revocable Trust/POD Accounts

Required information on owner(s) Report to IRS in SSN of owner Valid identification on owner(s) List of Beneficiaries Signature Card Nondocumentary verification Account styling: Jane Smith POD Government listsNote: You must run bank’s CIP on all owners. Not

on POD beneficiaries.

58

10/14/2015

30

MINOR BY ACCOUNTS

• Many financial institutions over the years have opened accounts called the "Minor By" account. These accounts are not protected or defined in any state or federal law. The minor by account has one person as owner and other parties as signers. IT IS RECOMMENDED THAT YOUR INSTITUTION DOES NOT OPEN THIS ACCOUNT. CONSULT YOUR FINANCIAL INSTITUTION'S ATTORNEY BEFORE CONTINUING THIS PRACTICE.

59

PARENT FOR CHILD

• A parent or parents can establish either a single‐party account or joint account for themselves where the funds are "earmarked" for their child. See single or multi‐party accounts for ownership and access information.

60

10/14/2015

31

Parent for Child1. Required Information on Person Account:




2. IRS Reporting: Report in SSN of first owner



Valid identification on owner

Signature card

4. Suggested Nondocument Verification:




5. Account Styling: John Smith or Mary Smith For Little Johnnie Smith*


7. Insurance: Insured under the ownership of the adult

8. Miscellaneous: *This is an older type of styling used to earmark funds for a child.

61

DEPOSIT ACCOUNTS FOR MINORS

• Some states have enacted statutes that allow the minor to have accounts on his or her own. These specific state statutes are geared to protect financial institutions offering services to minors. Without specific statute guidance it is usually not a good practice because of contract issues with the minor.

62

10/14/2015

32

In my state we do/do not have a statute allowing minors to have deposit accounts alone.

My bank does or does not allow minors alone on accounts.

63

SOCIAL SECURITY REPRESENTATIVE PAYEE

• A Social Security account is an account for a person receiving Social Security benefits who is unable to act on their own behalf. The Social Security Administration has named a representative payee to act for the person. This can be for minor children or adults who are unable to act for them. The representative payee is the person with access to the funds and the other named individual on whose behalf they are acting is the actual owner of the account.

64

10/14/2015

33

65


If owner lacks legal capacity, CIP the

representative payee

If owner does not lack legal capacity, CIP the

owner

Always a good idea to CIP both

Social Security Representative Payee Accounts1. Required Information on Person Account:




2. IRS Reporting: Report in SSN of beneficiary



Valid identification on representative payee and if possible, the owner.

There is a letter from social security that identifies the representative payee or the check may service as documentation.

Signature card provided by bank is signed by the representative payee even though the funds are owned by the beneficiary and reported in the beneficiaries SSN.



A CIP program must also have non documentary verification. Suggestions include: Welcome letter Call to customer to thank for business Third party verification Previous bank references

5. Account Styling: Mom, representative payee for child

OR

Child, beneficiary

Mom, representative payee

66

10/14/2015

34

Social Security Representative Payee Accounts6. Consult Government Lists: Section 326 List

OFAC List

7. Insurance: Insured under beneficiary individual coverage.

8. Miscellaneous: The owner of the funds is not a signer on this account.

Funds must be kept separate from the representative payee personal funds.

An exception applies for a parent who has more than one child receiving checks. He or she may put all those checks into his or her own individual checking account. See A Guide for Representative Payees.

67

Checklist for Social Security Representative Payee

Required information on owner and representative payee

Report to IRS in SSN of owner/beneficiary Valid identification on representative payee Check or letter from Social Security Nondocumentary verification Signature Card Account styling: Little Johnnie, beneficiary

Sally, Representative Payee Government lists

68

10/14/2015

35

GUARDIANSHIP ACCOUNTS

• If a child is ruled incompetent, or a minor is unable to manage his or her affairs, the court will appoint a guardian. The guardian's authority ceases at the death of the ward or mentally incapacitated adult (non compis mentis).

69

70


Since the owner lacks legal capacity, CIP the

guardian

10/14/2015

36

Guardianship Accounts

1. Required Information on Person the Account:




2. IRS Reporting: Report in SSN of owner



Valid identification on guardian

Court order provided by the customer should be followed exactly as the court requires.

Signature card signed by the guardian

4. Suggested Nondocument Verification:




71

Guardianship Accounts

5. Account Styling:

John Smith, minor Jane Smith, Guardian

It is signed by the person ordered in the court order usually the guardian. Sometimes however it takes a court order to remove any money.


7. Insurance:Insured under the individual coverage of the owner or person it is for.

8. Miscellaneous:

You can have court ordered accounts for both young and old. A young person would be called a Guardianship Account and an older person is usually called a Conservator Account.

72

10/14/2015

37

Checklist for a Guardianship

Required information on guardian and if possible, owner

Report in SSN of owner Valid identification on Guardian Letters of Guardianship Court order Nondocumentary verification Signature Card Account styling:Sally Smith, Ward

Jane Smith, Guardian Government lists

73

COVERDELL EDUCATION SAVINGS ACCOUNT (CESA)

74

10/14/2015

38

COVERDELL EDUCATION SAVINGS ACCOUNT (CESA)

• An education savings account is set up to save money for education for a designated beneficiary. The earnings are tax free to the beneficiary if used for education. It is not tax deductible to the depositor. This education savings account is a vehicle for adults to save for children’s educational needs.

75

Below 18 • The designated beneficiary (child) cannot be older than 18. Contributions can only be made up to the day the child turns 18. Beginning in 2002, a “special needs beneficiary”, an individual who because of physical, mental, or emotional condition (including learning disability) requires additional time to complete his or her education, may have contributions after age 18. It may stay in the account until age 30.

76

10/14/2015

39

Contributions

• $2000 per year, per child is permitted to an education savings account. The child cannot have $2000 contribution per depositor. The child may have $2000 as a designated beneficiary each year. The education savings account is not affected by contributions to IRAs by the depositor, responsible party or beneficiary. In other words, if the depositor put $2000 in a Roth IRA for himself or herself, he or she can still contribute $2000 in CESAs for each child. Additionally, if these children qualify for Traditional or Roth IRAs, the children could have both the CESA and the Traditional or Roth IRA.

77

Relationship

• The CESA is a triangular account. The depositor makes the contributions. The responsible party pays out the education savings account to the child for education and the child is the person who benefits from the education savings account. The depositor/contributor does not have to have a particular relationship to the beneficiary, but the responsible person must be a parent or legal guardian. The parent can be both the depositor and the responsible party. The child can be the depositor and the beneficiary.

78

10/14/2015

40

Income Restrictions

• The CESA depositor does not have to have earned income, but is subject to adjusted gross income restrictions similar to a Roth IRA.

79

DISTRIBUTIONS REQUIRED AT AGE 30 OR AT DEATH

80

10/14/2015

41

At age 30

• If the beneficiary has not used the CESA by age 30 (the day the beneficiary turns 30), the CESA balance must be distributed to a family member under the age of 30 within 30 days. This is eliminated for children with “special needs” who because of a physical, mental, or emotional condition requires additional time to complete his/her education. Individuals with “special needs” can keep their CESA past the age of 30.

81

At Death

• If the beneficiary dies before turning 30 and names a death beneficiary, the death beneficiary will receive the funds within 30 days. If the death beneficiary is a family member under the age of 30, he or she may keep the CESA and use for his or her own education. If the death beneficiary does not meet those requirements, the death beneficiary will receive a distribution of the funds within 30 days.

82

10/14/2015

42

Members of the Beneficiary’s Family

• The beneficiary’s child, grandchild, or stepchild.• A brother, sister, stepbrother, or stepsister of the beneficiary.

• A son or daughter of the beneficiary’s brother or sister.• The father, mother, grandfather, grandmother, stepfather, or stepmother of the beneficiary.

• A brother or sister of the beneficiary’s father or mother.

• The beneficiary’s son‐in‐law, daughter‐in‐law, father‐in‐law, mother‐in‐law, brother‐in‐law, or sister‐in‐law.

• First cousins.

83

Kindergarten through Grade 12

• Tuition• Fees• Academic Tutoring• Special Needs Services• Books• Supplies• Room & Board• Uniforms• Transportation• Extended Day Care• Computers and Services including internet if they contribute to the

education of the beneficiary or the beneficiary’s family.

84

10/14/2015

43

Qualifying Higher Education Expenses

• Tuition

• Fees

• Books

• Supplies

• Equipment

• Amounts contributed to state tuition program

• Room and Board (if student attends half‐time)– Posted room and board if living on campus

– $2500 per year if living off campus

85

EXCESS CONTRIBUTIONS

• A 6% excise tax applies each year to excess contributions made to an Education CESA on behalf of a designated beneficiary. Excess contributions include the following amounts– Contributions that are more than the contribution limit.

– Excess contributions for the preceding year reduced by:

• Withdrawals made during the year, and

• The contribution limit for the current year minus the amount contributed for the current year.

86

10/14/2015

44

• The excise tax does not apply if the excess contributions (and any earnings on them) are withdrawn before June 1st after the April 15th

deadline.

87

REPORTING: CESA

REPORTS PURPOSE IRS DEADLINES CESA OWNER

5498 ESA Contribution reporting May 31 May 1st

1099Q DistributionsFebruary 28th

March 31st Electronic Filers

January 31st

88

10/14/2015

45

Form 5305 EA


Reporting Contributions


10/14/2015

46

Reporting Distributions


Special situations

92

10/14/2015

47

• Child Actor Trust

• Farm Accounts

93

94

10/14/2015

48

95

ABLE


10/14/2015

49

• The Achieving a Better Life Experience (ABLE) Act would ease the financial burden for individuals with disabilities by creating tax‐free accounts that can be used to save for disability‐related expenses. These accounts can be created by individuals to support themselves or by families to support their dependents.

• The ABLE act was introduced by Ander Crenshaw [R‐FL4] in the House and by Robert Casey [D‐PA] in the Senate. Together, the two bills have over 400 cosponsors.

• The bill would create tax‐exempt, state based private savings accounts to fund disability‐related expenses to supplement benefits currently provided by Social Security, Medicaid, employers, and private insurance. The account shall be treated in the same way as a qualified tuition program, such as a 529. A 529 account allows families to save money for an individual’s education without being disqualified for certain aid programs and prevents tax penalties on the money saved and any income earned from


• Expenses would qualify as disability‐related if they are for the benefit of an individual with a disability and are related to the disability. They include education; housing; transportation; employment support; health, prevention, and wellness costs; assistive technology and personal support services; and other expenses.

• ABLE accounts will have no impact on Medicaid eligibility. Those receiving Supplemental Security Income (SSI) from Social Security shall have those payments suspended while maintaining excess resources in an ABLE account.


10/14/2015

50

Debit Cards

Regulation E: Friend or Foe?

99

Liability of Consumer for Unauthorized Transfers

Loss of Access Device Appearance on

Statement of Electronic Funds Transfer

Notice Given

Notice Not Given

2 Business Days

2 Business Days

Notice Given

Notice Not Given

60 Days 60 Days

*No liability *Anything bank could have

prevented after 60 days before notice is

given

$50 $500

©Gettechnical Inc.

10/14/2015

51

• Negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible under Regulation E. Thus, consumer behavior that may constitute negligence under state law, such as writing the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer's liability for unauthorized transfers.

©Gettechnical Inc.

Thank You!

102©Gettechnical Inc. 102

Deborah L. Crawford

Gettechnical Inc

1‐800‐354‐3051

[email protected]

Kyle Bennett

TTS

[email protected]

www.ttsTrain.com

800‐831‐0678

Upcoming WebinarsOctober 15th – Compliance Perspectives: A Monthly Update

October 16th – IRAS: The Basics

October 16th – IRA Series – 4‐Part Webinar

October 19th – 7 Habits of Highly Effective Banking Sales Teams

October 20th – Ten Simple Rules for Tellers to Save You Thousands

October 21st – FFIEC Guidance on Employees’ Use of Social Media

October 21st – Commercial Loan Applications – What Can Go Wrong?

October 22nd – IRAs: Beyond the Basics

October 27th – 25 Lessons Learned from Nationwide Safe Deposit Litigation

October 28th – Mortgage Servicing Compliance: Meeting Extensive New Regulatory Expectations

opening minor accounts - oncourse learningttsmedia.ttstrain.com/minorsdg101415.pdf · an account...

Documents