Opening Minor Accounts

Transcription

1 Opening Minor Accounts 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 the material; 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's employees. Gettechnical Inc. 1 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 or us at gettechnical@msn.com. Gettechnical Inc. 2 1

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 2

3 Risk Management (Anti money laundering procedures) Most banks now include not only a CIP Worksheet, but also a questionnaire for antimoney 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 3

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 4

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 5

6 11 Legal Ownership 12 6

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 7

8 Signature cards must be consistent. Ownership Single Party or Individual Multi Party or Joint Trust Must Match Must Match Title Signatures 15 Some signatures add special features. POD/ Trust Name of Beneficiaries POD pay at death to the list of beneficiaries. Only put on personal accounts. Number of Signatures Required 1 2 Some signature cards allow a 2 signature requirement. Agents or Authorized Signers Some signature cards allow signers (as permitted by card) on individual or joint accounts. 16 8

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 9

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

11 Summary: Basic Accounts OPTION #1 UTMA(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 child is 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 the funds all during the period for the child's benefit. My bank does/does not offer UTMA accounts. OPTION #2 MINOR 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 signature card contracts. A practice by many banks. NOT RECOMMENDED OPTION #3 MULTIPLE PARTY ACCOUNTS WITH MINORS Accounts where one of the parties to the account is a minor. Usually the minor's name is established first on the signature card contract. Many institutions add protective language to their deposit agreements for these accounts or have the parents on the joint account 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 #4 POD/TRUST ACCOUNT Sample: Parents ITF or POD Child Intention 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 Accounts OPTION #5 MINOR ONLY ACCOUNT Minors 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 is signed by representative payee. My bank does/does not have representative payee accounts. OPTION #7 GUARDIANSHIP ACCOUNT Ordered by the court the guardian acts for a child. Child owns the funds the guardian is a signer. The guardian has legal paperwork from the court. My bank does/does not have guardianship accounts. OPTION #8 COVERDELL EDUCATION SAVINGS ACCOUNT Owned 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 separate trust agreement. My bank does/does not have CESA 22 11

12 When one person is named legally to act for another Coverdell Education Savings Account UTMA Social Security Rep. Payee Guardianship Responsible Party acts for child Custodian acts for child Rep. Payee acts for beneficiary/ owner Guardian acts for minor Set up by EA contract Set up by state law and signature card Set up by Social Security Set up by court Signer is the responsible party No other signers allowed No other signers allowed No other signers allowed 23 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

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

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 14

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? 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

16 Uniform Transfer to Minors 1. Required Information on Custodian: Name Address (Before opening account) 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 child s SSN 3. Documentary Requirements: Signature card signed by the custodian (Reasonable time after opening) 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: (Reasonable time after opening) 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 Minors 5. 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, 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

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 Property No 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 life insurance you can put in a UGMA Age Custodian must release the funds to the minor at age 18 Age Custodian must release property to minor at age 21 "Gifts" The UGMA is restricted to lifetime gifts made by the donor to the custodial account "Transfers" Includes both transfers to the custodial account as well as gifts to the custodial account. For instance, transfers made to the minor under a will or funds received by debtors as well as proceeds of the lawsuit "Powers of Custodian" Investment powers largely passive "Powers of Custodian" The custodian has broader investment powers and can invest with same skill and care as would a prudent person with his\her own property 34 17

18 UTMA at DEATH Subject to State Law Child Dies Custodian Dies Did custodian name successor? Funds go to the child s estate YES NO Documentation 1. Death Certificate 2. Letters of Administration or Letters of Testamentary Successor custodian takes over as custodian If child is over 14 and acts in 60 days may name own custodian subject to state law Documentation 1. Death Certificate on custodian 2. Identification on new custodian 3. New signature card If not, then legal guardian becomes custodian 35 Access Many problems spots on multi party accounts where the minor did not sign

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

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

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

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 22

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

24 1. Required Information on Persons Account: (Before opening account) Multi Party Account 2. IRS Reporting: Report in SSN of 1 st Owner 3. Documentary Requirements: (Reasonable period after ) 4. Suggested Nondocument Verification: (Reasonable period after ) 5. Account Styling: 6. Consult Government Lists: 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 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. 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 Whitepages.com John Smith or Mary Smith (You should not have and accounts in joint ownership) Section 326 List OFAC List 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

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

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 1 st 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

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

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 Required Information on Persons Account: (Before opening account) Testamentary Trust/POD Accounts 2. IRS Reporting: Report in SSN of 1 st Owner 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 3. Documentary Requirements: (Reasonable period after ) 4. Suggested Non document Verification: (Reasonable period after ) Valid identification on owners Signature card signed by all owners A CIP program must also have nondocumentary verification. Suggestions include: Welcome letter Call to customer to thank for business Third party verification Previous bank references 56 28

29 5. Account Styling: Testamentary Revocable Trust/POD Accounts 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 6. Consult Government Lists: Section 326 List OFAC List 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 lists Note: You must run bank s CIP on all owners. Not on POD beneficiaries

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

31 Parent for Child 1. Required Information on Person Account: Name Address (Before opening account) 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 first owner 3. Documentary Requirements: Valid identification on owner (Reasonable time after opening) Signature card 4. Suggested Nondocument Verification: A CIP program must also have non documentary verification. Suggestions include: (Reasonable time after opening) Welcome letter Call to customer to thank for business Third party verification Previous bank references 5. Account Styling: John Smith or Mary Smith For Little Johnnie Smith* 6. Consult Government Lists: Section 326 List OFAC List 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

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

33 Who is the Customer? 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 65 Social Security Representative Payee Accounts 1. Required Information on Person Account: Name Address (Before opening account) 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 beneficiary 3. Documentary Requirements: Valid identification on representative payee and if possible, the owner. (Reasonable time after opening) 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. 4. Suggested Non document Verification: A CIP program must also have non documentary verification. Suggestions include: (Reasonable time after opening) 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 33

34 Social Security Representative Payee Accounts 6. 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 34

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 Who is the Customer? Since the owner lacks legal capacity, CIP the guardian 70 35

36 Guardianship Accounts 1. Required Information on Person the 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 owner 3. Documentary Requirements: (Reasonable time after opening) 4. Suggested Nondocument Verification: (Reasonable time after opening) Valid identification on guardian Court order provided by the customer should be followed exactly as the court requires. Signature card signed by the guardian 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 71 Guardianship Accounts 5. Account Styling: 6. Consult Government Lists: 7. Insurance: 8. Miscellaneous: 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. Section 326 List OFAC List Insured under the individual coverage of the owner or person it is for. 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

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 37

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

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

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 40

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 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

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 inlaw, 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

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

44 The excise tax does not apply if the excess contributions (and any earnings on them) are withdrawn before June 1 st after the April 15 th deadline. 87 REPORTING: CESA REPORTS PURPOSE IRS DEADLINES CESA OWNER 5498 ESA Contribution reporting May 31 May 1st 1099Q Distributions February 28 th March 31 st Electronic Filers January 31 st 88 44

45 Form 5305 EA Gettechnical Inc. 89 Reporting Contributions Gettechnical Inc

46 Reporting Distributions Gettechnical Inc. 91 Special situations 92 46

47 Child Actor Trust Farm Accounts

48 95 ABLE Gettechnical Inc

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 Gettechnical Inc. 97 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. Gettechnical Inc

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 Notice Given Notice Not Given 2 Business Days 2 Business Days 60 Days 60 Days $50 $500 Gettechnical Inc. *No liability *Anything bank could have prevented after 60 days before notice is given 50

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. Deborah L. Crawford Gettechnical Inc gettechnical@msn.com Thank You! Upcoming Webinars October 15 th Compliance Perspectives: A Monthly Update October 16 th IRAS: The Basics October 16 th IRA Series 4 Part Webinar October 19 th 7 Habits of Highly Effective Banking Sales Teams Kyle Bennett TTS kbennett@ttstrain.com October 20 th Ten Simple Rules for Tellers to Save You Thousands October 21 st FFIEC Guidance on Employees Use of Social Media October 21 st Commercial Loan Applications What Can Go Wrong? October 22 nd IRAs: Beyond the Basics October 27 th 25 Lessons Learned from Nationwide Safe Deposit Litigation October 28 th Mortgage Servicing Compliance: Meeting Extensive New Regulatory Expectations Gettechnical Inc