Would anyone care to share their bank's policy on what to obtain for a minor? We are working on clarifying what we require (nothing at this time) for minors at account opening. We open a great deal of savings accounts for newborn babies and obtain only the required four so far. Thanks to all!

What sorts of accounts do you open for newborns? Under what set of circumstances would you consider a newborn a "customer" for CIP purposes? Are these UTMA accounts, POD or ITF accounts in a parent's name (naming baby as beneficiary), or what?

How do you open an account for a minor that isn't old enough to sign the contract?

Assuming that the accounts are titled as UTMA, the custodian must provide the minor's legal name, DOB, SSN/ITIN & physical address.

Since Wisconsin law allows minors to be party to an account, we have guidelines in place for minor accounts for non-UTMA whereby the minor is going to have authority to transact. (Generally, a parent, or legal guardian, must be joint on the account). In addition to the minimum required above, we also obtain ID verification that is appropriate for their age.

Hope that helps.

I am new in compliance and we are having a discussion about UTMA vs. "Minor" Savings Account (parent or legal guardian must be on the account). I am understanding from our attorney that an UTMA should have some sort of legal documentation with permission from the donor to comingle funds. That an UTMA wasn't meant to be used as a savings account for lets say, birthday money and such. After reading rlcarey's response, I am wondering if he has some options that I might look into. I am also in Texas.

You would need to refer to your state statute, as each state has adopted their own version of UTMA. In Wisconsin, it is permissable to have a savings account.

We do "educate" the custodian as to what type of funds are allowed in the account, or what is restricted (like the child's payroll), but we are not subject to monitoring the activity in the accounts. If we detect inappropriate activity, however, we do address the situation with the custodian.

Every state has a UTMA or UGMA law. Some states have laws that give minors the same capacity and right to hold a deposit account as an adult. Some allow minors to own an account but allow a parent to seize control of the account (my wording) by notifying the bank. Some states allow a minor to hold an account but only individually (why, I'm not sure). And others are totally silent on account ownership by minors.

As far as I know, none of the states that allow a minor the capacity to contract for a deposit account says anything about the age at which a minor is old enough to enter into such a contract, but I think any bank would be in trouble trying to enforce a contract allegedly made by a "babe in arms."

The other consideration is whether your bank will require "CIP" information on a minor whose funds will be in a UTMA. You'll need the kid's SSN for IRS reporting purposes, but what does your CIP say about the rest of the "four questions"? Because in a UTMA, the kid is not your customer under the CIP regulations.

You need to familiarize yourself with the following:

Texas Finance Code § 34.305. DEPOSIT ACCOUNT OF MINOR.

and

PROPERTY CODE CHAPTER 141. TRANSFERS TO MINORS

CIP states, "In the case of a minor that cannot produce the required documentation, the social security card along with the required identity of the legal guardian". If I am understanding the TX statute correctly, a minor can be the sole owner of a savings account and the parent can take control by notifying the bank in writing. We don't allow minors to open accounts as sole owners, they must have a legal guardian on the account with them.

Back to my original point, if they can't sign the depositor's contract, how can they be on the account?? You would have no contractual relationship with the minor to support the fact that they are on the account. If the parent's want to open a separate account for little Bobby Sue, then so be it, but how can you put someone on an account without binding them to the depositor's contract. What happens in 12 years when Bobby Sue comes in to make a withdrawal?

Thank you, I understand your point completely.

Your core question relates to BSA, but it's suggestion that you open accounts for "newborns" and might somehow consider them to be the "customer" is creating some distraction.

If your account title is: Jane Doe, Beneficiary Anystate UTMA, Jack Doe, custodian then Jack alone signs the contract. Jack is your customer for CIP purposes. All you need on Jane is a name and, if the account is interest bearing, a certified SSN and a mailing address which definitely does not need to be a physical address.

If your account title is: Jane Doe [Jane is a minor] then Jane is your customer. Jane alone signs the contract and you follow the instructions in your CIP. (It may legitimately reduce identification requirements for the minor, but it cannot eliminate them.)

If your account title is: Jane Doe [Jane is a minor] and Sally Doe then Jane and Sally are your customers. Jane and Sally both sign the contract and you follow the instructions in your CIP. (Sally cannot sign Jane's name on the contract regardless of whether she is her mother or a Siamese twin.)

If the account title is "Jane Doe, a minor, by Sally Doe, parent, natural guardian, or spiritual advisor and Jane does not sign anything, then I don't think you have a contract. If a bank opens accounts that way nothing else it does makes much difference.

In California, a minor is able to own a deposit account, so you would have to set up an institution policy as to a minimum age you would accept a depositor. When my daughter was a minor, she was able to open a savings account with her school ID, and this was post-CIP rules.

Another way to approach this would be opening the account as an ITF or POD. Sally Doe POD Jane Doe (minor) and you get Sally's CIP info and documents, and whatever information you would normally obtain for a beneficiary. In that situation, the account is fully controlled by the parent.

After posting my initial question, our bank attorney provided IL law (205 ILCS 5/45.1) which allows a state bank to accept deposits made by a minor & may open an account in the name of such minor & the rules and regulations of such bank with respect to each such deposit & account shall be as binding upon such minor as if such minor were of full age & legal capacity.

Thank you to everyone that responded. We need to do some work on our end to ensure when that babe comes into the bank 20 years later to withdraw money, we CIP them. Merry Christmas to everyone!

"We need to do some work on our end to ensure when that babe comes into the bank 20 years later to withdraw money, we CIP them."

I don't understand. How can you open an account for someone and then CIP them 20 years later. THe illinios law is not different than those in a lot of states. However, if the minor can't sign their name, there is no contract.

And if the minor does open an account, your CIP responsibilities occur THEN, not when a withdrawal is requested.

Plain and simple -- you can't enter a contract with someone who is incapable of agreeing to the contract, regardless of what state law permits.

John, since our state does allow accounts to minors, what source would you use if you wanted to impose a cut-off age? Any minor under that age would then have to open either a UTMA account or a joint account with an adult who can sign a contract and take responsibility for any actions by either account holder.

Doug,

First, I don't think you'll be on sound ground setting up a joint account if the minor can't sign. It won't be recognized as a joint account by the FDIC for insurance purposes, and the minor would arguably not have any rights in the account if he or she didn't sign the contract. I'd talk to legal counsel before taking that direction.

As for setting a cut-off age for accepting a minor's account, why do you need a source other than bank policy? Banks don't have to accept deposit contracts they don't want, and it's up to the bank to decide where to draw the line. If I were running a bank (and I am thankful I'm not), I'd likely set two age restrictions -- one for minors who want to open a checking account and the other for minors who want to open a savings account. The trick is in figuring out where you want to draw those lines. Ability to sign one's name is one hurdle I would set; another would be a basic understanding of what having a bank account means. The bar would be higher, obviously, for a checking account.

Grannie Two,

I'm familiar with the 1965 Illinois statute to the extent that I have done training on it for the Illinois Bankers Association. As rlcarey notes, its not unlike parallel statutes in other states. All these statutes do is create a specific exception to the general rule that contracts with a minor are voidable by the minor. A basic rule of statutory construction that courts use is that any exception is narrowly construed; i.e. when you are figuring out what it says you cannot add more words than you see on the page.

The Illinois statute does not say or even imply that a bank can contract with a minor without getting the minor's signature. You cannot. Even state legislatures try to avoid statutes that would make them subject to ridicule.

As also noted, CIP has an explicit timing requirement, "prior to opening the account."

Ken - Am I reading from all the gurus that answered that banks should not have an account with a minor if they can't CIP them by following their own CIP requirement? Is the recommendation then to only open ILUTMAs? Or open accounts in the parents name and leave the child's name off all together?

It's my understanding that CIP procedures should include guidelines for opening accounts for those who cannot sign for themselves - which would include minors. We would - or should - set up the account as a UTMA and CIP the responsible party - who would be the parent/guardian.

The types of accounts that a bank will establish for a minor is a bank policy decision based on the bank's understanding of state laws and legal precedents (which vary widely from state to state on this question) and its assessment of the risks involved. In some cases, an UTMA (available in all states) fits the customer's needs; in others, it will not, and to assume that every minor account should be an UTMA can be a significant mistake.

Those policy decisions are quite separate from how the bank's CIP ought to address minor accounts.

One thing can be said that should apply universally, however -- a minor who is too young to understand what he or she is doing or who cannot sign a deposit contract cannot be held to that deposit contract, no matter what state law permits regarding accounts for minors.

Here's a wrinkle in as far as minor accounts go. Suppose a person comes in to open a regular account but a minor, their supposed child, is on the account as well. However, this person puts a fake birthdate on the account. This person's child is not a minor but is actually an adult. This person has a check made out to the "minor's" name, deposits it and subsequently withdraws all of the money.

The "minor", really an adult, finds out later that this check was negotiated and the account depleted. A claim is made on the bank due to forgery and/or fraud. Is the bank on the hook, and if so, what could be done with respect to CIP to prevent this? Grandparents usually don't even like their children to know there is an account opened for the grandchildren, etc.

Any information is deemed as helpful but of course not binding.

Rural Banker - I'm sure someone can give you expert advice, but I'll think out loud.....

I would consult with bank counsel. I believe that this would be a an offense that could be prosecuted. I'm not sure if the bank would be on the hook, but if so, they would be able to seek restitution or a judgement from the deceptive party.

How to prevent this? You could make it a policy to have a birth certificate and social security card before opening an account associated with a minor. I know that when you go for a driver's learning permit in our state, those two items are required. To register for school or even little league baseball, a birth certificate is required.

I'm not recommending you do so, I'm just suggesting that it would minimize risk.

Either State law allows for a minor to contract for a deposit account or not. Contracting for an account requires a signature. If anyone wants to open a joint account without the minor present and without presenting appropriate ID at that time, then the account should not be opened.