Question: We are having a debate at our bank regarding checking accounts with minors as signers. You may have covered this concern in a prior edition of Banker's Hotline, but I cannot find or recall the answer. Our concern is whether it is okay to allow a parent or guardian to add a minor or to open a joint account with a minor. We do not solicit this type of business, however it is a popular request of existing customers to ask about opening an account for their son or daughter. The children may be working and receiving checks and the parents want their children to learn about maintaining a checking account while in high school so they are prepared for college or the working world. This makes perfect sense, however several of our employees think that a minor should not or cannot be on a checking account as a signer even if the parents desire it. Can you help?
Answer: Here again, you'll have to look to your state law. In most cases a minor does not have the legal capacity to enter into a contract unless the law specifically grants it. Several states have laws that allow a minor to enter into a deposit account contract in their sole name.
Opening an account in the minor's name alone or with the parent as a signer is one thing. Adding a minor as a signer on a parent's account is certainly another. You might consider only doing so if the adult is willing to sign an indemnification agreement to protect your institution against any loss or claim that might arise from allowing the child to sign on an account when he does not have the legal capacity to do so.
Accounts for children have been in existence since bankers called at schools each week for deposits of dimes into savings accounts back in the 1930's and buying war bond stamps in the 1940's. Today, many financial institutions run "branches" right inside high schools with student staffs and customers. It's a popular move with communities, your boards, and your administration.
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