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QUESTIONS REGARDING THE SETTING UP A CUSTODIAL TRUST ACCOUNT FOR YOUNG PERFORMERS

Although Equity cannot anticipate all of the questions and concerns parents and guardians might have regarding the custodial trust account provision contained in the Child Performer Education and Trust Act of 2003, which is a state law in New York; however, we will attempt to address some inquiries. If you have additional questions or need further assistance please feel free to contact Willie Boston at 212-869-8530 and/or the Department of Labor’s website, which is being revised to address questions about trust accounts.

What is a Custodial account?
It is an account established at a financial institution, like your local bank or the Actors Federal Credit Union, for the benefit of a minor and is managed by the parent/guardian or another designated custodian until the child reaches majority.

In addition to a percentage of your child’s salary, other assets such as stocks, bonds, and life insurance policies and annuities can also be transferred or gifted to a custodial trust account.

Under most state laws minors would not be permitted to own assets like mutual funds, real estate or stocks but the establishment of a custodial trust allows parents, guardians, grandparents, and others to transfer assets to this trust, which will become the property of the minor once he/she reaches majority.

What types of custodial account(s) will the state of New York currently accept to fulfill the requirements of the law?
There are three types of custodial accounts that would suffice for the purposes of the new state law in New York:

  • The Uniform Gift to Minor Account (UGMA)
  • The Uniform Transfer to Minor Account (UTMA)
  • The Blocked Trust Account

What are the differences between these three accounts?
First, you will find that banks in most states will offer either the UGMA or the UTMA accounts but not both. Essentially there are little, if any, substantial differences between an UGMA and an UTMA account. The UTMA account is generally more flexible than the UGMA in terms of assets that can be deposited into the account, such as real estate. In a number of states the UTMA has replaced the UGMA.

The Blocked Trust Account is offered by a fewer number of financial institutions, the Actors Federal Credit Union being one of those institutions that offers this type of account.

Although the original intention was to have the trust component of the New York State law mirror California’s Coogan Account, an UGMA/UTMA account, which are currently acceptable under the Child Performer Education & Trust Act, will permit the custodian of the account to remove deposited funds if it will be used directly for the benefit of the minor, while funds deposited into a Blocked Trust account are held in abeyance until the child reaches his/her majority.

My child does not live in New York State do we still have to set up a trust account?
This is only a state law and therefore only applies to either those minors residing in the state or those minors that work in the state.

My child already has a Coogan Account set up in California. Do we have to open up another trust account in New York or does the trust account have to be in New York?
No, you do not have to set up yet another trust account if you already have a Coogan Account and no the trust account does not have to be with a New York State financial institution.

Where can I go to open up one of these custodial accounts (UGMA, UTMA or a Blocked Trust Account) and how much money do I need to deposit to open up one of these accounts?
As previously stated most banks will offer either an UGMA or UTMA while the Actors Federal Credit Union offers the Blocked Trust Account. The Credit Union does not require the deposit of any money in order to open up an account, in fact you can even do it over the phone; however, if you decide to open up an UGMA or an UTMA account you will need to check with the specific financial institution about whether you have to deposit money at the time you open up the account.

What happens after I open up the account?
You should receive documentation from the financial institution including all necessary instructions so that the employer can deposit the required 15% into the account.

Will my child still owe taxes on the 15% that goes directly into the trust account?
Yes, that is part of gross salary.

What happens if I do not open up a trust account?
If you have not notified your child’s employer of the existence of a trust account within 15 days of commencement of employment the employer will be forced to transfer the 15%, with the child’s name and address, to the Child Performers Holding Fund within the office of the New York State Comptroller. Ultimately failure to open up a trust account will also mean that when it is time to renew your child’s work permit it will be denied.

The New York State law requires that 15% of my child’s gross income be deposited, by the employer, into his/her trust account but can that amount be increased?
Yes, the law merely establishes the base amount that must be deposited into the trust account but you can request that your child’s employer deposit more that 15%

I have two young actors in my family. Can I just set up one custodial account for both children?
No. A custodial account can only belong to one child so you would have to set up a separate trust account for each child.




 
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