by Laura Wilson, a Principal with Pegasus Educational Services, LLC
Banks routinely get requests for memorial fund accounts and benefit accounts. A death or other tragedy has occurred in the community and a well-meaning soul wants to open an account to collect money for the survivors or victims. The bank is compelled to honor the request. To say no seems cold and unfeeling. But how should the account be opened? The goal is to protect the bank, and honor the request, but we can’t always open the account as it is presented. By asking a few simple questions in the beginning, the bank has the information needed to open the account in a manner that is best for all involved.
To determine how the account should be opened, consider the following scenarios.
The persons are over age 18 and able to transact business for themselves: The Smith family’s house is destroyed by fire or natural disaster. A member of the community comes in to the bank to open a benefit fund for the Smith family. Mr. and Mrs. Smith are not physically injured. If the community donates funds to help the Smith family, Mr. and Mrs. Smith must be able to transact on the account and make their own decisions regarding how the money is spent. The benefit account is opened as a joint account for Mr. and Mrs. Smith.
The person is over 18 years of age, but unable to transact business for himself: A 23 year old man is injured in a car accident and will need extensive medical care. He is unable to transact business for himself and he is not married. The community wishes to contribute money to help with the cost of his medical expenses.
The benefit account may be opened by a court appointed fiduciary or a person holding the injured party’s durable power of attorney. If there is no one with authority to transact on behalf of the injured man, perhaps the account is opened by his church or civic organization for his benefit. The organization is responsible for using the funds for the purpose intended.
The beneficiary is under 18 years of age: Mr. Doe is killed in a car accident leaving behind two small children. A family friend wants to open a memorial fund to act as a college saving account for the children.
The simplest method to achieve this goal is to open a Uniform Transfers to Minors Act account for each child. The family friend or the surviving parent may be custodian. If the UTMA option is rejected, the account may be opened by a church or civic organization as discussed above.
Establishing an irrevocable trust is always an option: In each of the instances above, an irrevocable trust may be established for the collection, investment and disbursement of funds.
The information provided is not offered as legal advice. It is intended to assist bank staff in its decision making process by highlighting “best practice”. For guidance in specific situations, consult your bank’s legal counsel.
Laura Wilson is a Principal with Pegasus Educational Services, LLC. She will be presenting at the Iowa Bankers Association Opening New Accounts Staff Training. The evening event is offered in eight locations across the state throughout April and May. Click here for details.