How to Write a Check to a Minor Child
Understand the best practices for writing checks to minor children, ensuring the funds are accessible and managed appropriately.
Giving financial gifts to minor children through checks can be a thoughtful way to contribute to their future. Understanding the regulations surrounding minors and financial transactions is important for both the gift-giver and the recipient’s guardian.
Writing a Check Directly to a Minor
When writing a check directly to a minor, fill it out as you would for any adult. This involves writing the current date in the top right corner, followed by the minor’s full name on the “Pay to the Order of” line. You then enter the numerical amount in the box provided and write out the same amount in words on the line below. Finally, sign the check in the bottom right corner.
Despite correctly filling out the check, a minor typically cannot legally cash or deposit a check on their own. Federal and state laws generally require individuals to be at least 18 years old to enter into contracts, which includes opening bank accounts or independently conducting banking transactions. While some banks offer joint accounts where a minor can be a co-owner with an adult, or accounts for teens with parental oversight, a minor usually cannot act unilaterally. Therefore, writing a check solely in a minor’s name often necessitates a parent or guardian’s involvement for endorsement and deposit.
Understanding Custodial Accounts
To provide a minor with direct access to funds, a custodial account is often established. These accounts, commonly known as Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts, allow an adult to manage assets for a minor’s benefit until the minor reaches the age of majority, typically between 18 and 25, depending on the state. The adult who manages the account is known as the custodian. Funds placed in a custodial account become the irrevocable property of the child, meaning the gift cannot be taken back.
The custodian has the authority to make investment decisions and manage the funds, but all withdrawals must be used for the minor’s benefit. Custodial accounts simplify the process of gifting assets to minors by avoiding the need for complex trusts. While these accounts offer a flexible way for minors to receive funds, they differ from other savings vehicles, such as 529 plans, in that the funds can be used for any purpose benefiting the child, not just educational expenses.
Writing a Check to a Custodian
When contributing to a minor’s custodial account, the check should generally be made payable to the custodian for the benefit of the minor. The most common format for the payee line is “Custodian [Custodian’s Full Name] FBO [Minor’s Full Name].” The acronym “FBO” stands for “For the Benefit Of.” This designation clearly indicates that the funds are intended for the minor’s custodial account, even though the custodian is the direct payee.
For example, if John Doe is the custodian for his niece, Jane Smith, the payee line might read: “Custodian John Doe FBO Jane Smith.” Some financial institutions may also accept checks made out directly to the financial institution with the custodial account number in the memo line, or simply to the custodian. It is advisable to confirm the preferred payee format with the specific financial institution where the custodial account is held to ensure a smooth transaction.
Depositing the Check
Once the check is correctly written to the custodian for the minor’s benefit, the custodian is responsible for endorsing and depositing it. The custodian must sign the back of the check in the endorsement area. If the check is made out to “Custodian [Custodian’s Name] FBO [Minor’s Name],” the custodian’s signature alone is typically sufficient for endorsement.
The check is then deposited into the minor’s custodial account. Many financial institutions allow mobile check deposits for custodial accounts, which can expedite the process. The funds will usually post to the account within one business day, though there may be a collection period of several business days before the funds are fully available for withdrawal or investment. Ensuring proper endorsement and following the bank’s specific deposit instructions helps guarantee the funds are successfully credited to the minor’s account.