Custodial accounts are useful for members when they have special legal responsibilities. The account is established by a Custodian acting as Executor (estate account), Administrator, or Guardian for a Principal.
A Custodial Account is opened using the Social Security Number of the individual who owns the funds (the Principal) or the Tax I. D. Number of the estate.
The purpose of a power of attorney is to appoint an agent for the principal. The individual (or company) who executes it is the principal. The person the principal appoints to act on his behalf is called the attorney-in-fact. At the credit union, we refer to this as your "Convenience Person".
While POAs may come in different forms, the Uniform Statutory Form Power of Attorney Act provides a uniform form (as the name implies) to be used for POAs that is straightforward and easy to understand. The principal simply initials the powers he/she wishes to bestow upon the attorney-in-fact and crosses through (or fails to initial) the rest. You may obtain this form from your attorney or via the internet.
There are various types of trust accounts - each with a different purpose. Read below to see the types of trust accounts that we offer.
It is important to note that the credit union does not have a Trust Department and is prohibited by law from acting in the capacity of Trustee. We will not accept legal liability for administering a Trust Account. We will only follow the instructions given to us on the documents opening the account with us.
For tax and other reasons, parents, grandparents and others sometimes want to transfer ownership of cash and other financial assets to children who are too young to handle such assets. One way to do this is to establish a trust. The Uniform Transfers to Minors Act (or Uniform Gifts to Minors Act) provides an alternative that may be simpler, cheaper and faster than a trust.
Regardless of the state in which the member and minor reside, when a minor applies for a Savings account with us, it is issued under the provisions of the "State of Maryland's Uniform Gifts or Uniform Transfers to Minors Act." Anyone can open a UTMA account using the name and TIN of the minor. A UTMA account is a restricted account, which means that the custodian is the only individual that has access to this account.
Either the custodian or the minor (beneficiary) must be eligible for membership in the credit union.
To open a Custodial Account, either the Custodian or Principal must be eligible for membership. The following documents are required:
In order for a power of attorney to remain in effect despite the subsequent incapacity or incompetency of the principal or the passage of time, it must be a durable POA. A durable POA is one that states that it shall remain in effect in those circumstances. If a POA is not durable, its effectiveness will cease when the principal is adjudged to be incompetent or incapacitated.
The principal may revoke the POA at any time for any reason. All powers of attorney terminate automatically upon the death of the principal. Any language quoted to the contrary will not extend the effectiveness of the POA beyond the principal’s death.
A Totten Trust is just another name for the usual payable-on-death type of account. Testamentary trusts, tentative or Totten trust accounts, payable-on-death accounts, and other similar accounts are accounts that evidence the owner’s intent to have funds in the account transferred to named beneficiaries at the time of the owner’s death. Unlike more complicated trusts, Totten or payable-on-death trusts can be created at the credit union merely by indicating that intent in the title of the account.
A testamentary account in which the named beneficiary is the spouse, child, or grandchild of the owner, is "insured up to $100,000 in the aggregate as to each such beneficiary, separately from any other accounts of the owner or beneficiary, regardless of the membership status of the beneficiary." If the named beneficiary is not the owner's spouse, child, or grandchild, then the funds in the account "shall be added to any individual accounts of such owner and insured by $100,000 in the aggregate."
A Living Trust can be set up by an attorney, or by the individual(s) themselves (a Grantor/Trustor). Legal documentation, the Trust Instrument, must exist to establish a Trust Account. They are always created outside the credit union.
The custodian can be any adult over the age of 21. The custodian manages the money in the account, and authorizes all deposit and withdrawal transactions. Although withdrawals can only be for the benefit of the minor child, it is not the responsibility of the credit union to monitor these transactions. The minor child cannot withdraw funds from this account.
It's important to understand that funds held in a custodial account are owned by the child. Even though the child will not have control of the property until later, the child is the owner as soon as funds are transferred to the account. This fact has important consequences:
The account must be titled as a UTMA account. For example the primary member of an account for Sally Doe (minor) would be "Sally Doe, Beneficiary UTMA, John Doe, Custodian”.
The account terminates when the child reaches a specified age. The age depends on the state's law and can range from 18 to 25. In some states the custodian can choose to designate a different age than the one that automatically applies, but the law will impose a limit on the age the custodian can choose. In the District of Columbia the age is 18, in Maryland it is 21, and in Virginia you may set the age from 18 through 21.
To open a Uniform Trust to Minors Account, complete the Uniform Trust to Minors Accounts application. We will verify the identity of the adult custodian. If you are already a member, additional verification will not be necessary.
We understand that this is an emotional time and can be very stressful. The information below is related to our role in the process of handling your loved ones' financial matters. We also recommend you contact your financial and legal advisors for assistance.While each situation is different and might require additional information, the most important documents that you will need to obtain are:
To help you get started in this process, please call our Membership Engagement Team at (301) 929-7990. We are here to help.
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