How to Give a Certificate of Deposit in a Minor’s Name?
Important Points To Be Aware of When Dealing with Securities, Banks, and Laws Applicable to Minors
A CD (Certificate of Deposit) is a savings certificate that entitles the bearer to receive interest. For example, a $5000 five-year CD compounded annually with an interest rate of 3% would be worth $5750 at the end of term. It is a time deposit that restricts holders from taking out funds at any time. If the funds are withdrawn prior to term, the holder will incur a penalty. Certificates of Deposit are sold by banks and credit unions and are insured by the FDIC.
The Uniform Gifts to Minors Act
When giving a certificate of deposit in a minors name, UGMA allows minors to own property that can include securities. Under the UGMA, even though no attorneys or special trust funds are involved, the donor must appoint a trustee or custodian to supervise the account.
Custodial Responsibilities to Minor
A donor may appoint anyone as custodian, even themselves. The custodian is responsible for managing the assets and has the ability to use the funds to purchase securities on the minor’s behalf. When reaching legal age, or age of majority, access to the certificate of deposit must be given to the minor. When giving a certificate of deposit in a minors name, age of majority can be either 18 or 21, and in some cases, 25.
Control over Certificate of Deposit
If a certificate of deposit is in the name of the minor ‘or’ a guardian/custodian, the minor may be able to cash the certificate of deposit in at any time. Giving a certificate of deposit in a minor’s name under UGMA would allow only the custodian to control the funds until term or until minor reaches age of majority. Using the term ‘and’ in the names of account holders, all parties would have to consent as to withdrawal of funds.
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