Minor’s Claims/Funds – Restricted Access Custodial Accounts

Custodial accounts are permitted under RC 2109.13 as alternatives to surety bonds whereby the court-appointed fiduciary places personal property (cash, securities, or valued tangible personal property, e.g. coins, artwork, collections) on deposit with a bank, trust company, or brokerage house for safekeeping, in lieu of purchasing a surety bond equal to twice the value of the deposited asset.  By accepting the custodial deposit, the bank or trust company agrees and represents to the Court that it will not permit the fiduciary to have access to, or withdraw, the deposited assets without a specific court order. Custodial accounts are also permitted under RC 2111.05 and 2111.18 to be made with depositaries authorized to receive fiduciary funds when a settlement of a minor’s claim is being made without a guardianship, without a court-appointed fiduciary, or where the net assets being received for the minor’s benefit do not exceed $25,000.

An account created pursuant to RC 5814.01 to 5814.09 (the Ohio Uniform Transfer to Minors Act/”UTMA”) is not a custodial account of the type referred to in these proceedings.  Even though the person holding the minor’s funds under a UTMA account is referred to as a custodian, that statute gives a UTMA custodian, as well as the minor, certain rights to control and access the funds that are inconsistent with the custodial accounts created under RC 2109.13 which are used in lieu of bond.  Therefore, an account titled a “Jane Doe, Custodian for Billie Doe, UTMA” is not a proper restricted access custodial depositary account for these purposes and does not comply with the court’s order allowing a custodial deposit.

The person ordered to make the custodial deposit has the duty of assuring the Court that the bank, trust company, or brokerage house (the “custodial depository”) file with the Court the written verification that the custodial deposit will be held in accordance with the Court’s order authorizing the deposit.  If a guardianship has been dispensed with because the funds being deposited are $25,000 or less, then the Standard Probate Form 22.3 (verifying the deposit of funds for minors until age 18) will be used.  If the funds being deposited are part of funds held in a guardianship and are deposited in lieu of the guardian filing a bond to cover the deposits, then Local Form 22.3A (verifying the initial receipt and deposit for an indefinite period) must be completed and signed by an authorized representative of the custodial depository.  The required forms must be used to verify the deposits are held in accordance with the applicable Court Order and a simple letter from the custodial depository will not substitute for the completed verification form.

If the funds deposited are part of a guardianship, conservatorship or estate, the fiduciary remains responsible and accountable to the Court for the deposited asset, its management, investment and re-investment, if appropriate.  Access to the asset to perform those functions will also be established by a Court Order. The fiduciary remains responsible for assuring that annually, after the date of the initial deposit of the custodial assets, the custodial depository files with the Court an annual verification (Local Form 22.3B) that reaffirms the assets remain in its custody subject to the access limitations and if the assets are cash then the report must reflect the then current market value of the assets.

If the guardianship is dispensed with and the funds ordered deposited pursuant to Court Order, there is no further accounting for the assets by the applicant as no one but the minor upon attaining age 18 can access the funds, unless the Court authorizes access for a specific purpose.  The financial institution will make annual reports verifying the continued account existence and its balance.

The fiduciary or person charged with making the deposit is responsible for assuring that the deposit is correctly made.  The Court monitors custodial accounts closely.  If the documentation submitted does not reflect compliance with the Court’s Order, the Court may allow a very short time for the depositor, the parent, or the fiduciary to obtain compliance, may require bond, or may impose other sanctions against the responsible fiduciary, parent or depositor.

The process can be seamless, if the fiduciary has an attorney guiding them and if they are using a custodial depository whose staff is accustomed to these types of accounts.  It can be problematic if attention is not given to the details.  If a need for frequent access to the assets is expected to arise, then bonding may be a more appropriate alternative since access requires a court order.

A restricted access custodial deposit can be terminated with a Court Order. When determining whether to permit lift the restrictive access, the Court will establish the amount of the surety bond that must be deposited before the termination will be approved.

Surety bonds are increasingly difficult to obtain because of tightened underwriting standards and a reduction in the number of carriers issuing them.  Additionally, the costs of the premiums for the surety bond can be substantial (the larger the bond, the higher the premium).

Due to the complexity of the law related to custodial accounts, the unfamiliarity of many of the staff of the potential custodial depositories, and the scrutiny that the Court gives to assuring the proper creation of these accounts, it is recommended that the assistance of an attorney be obtained.  The employees of the Probate Court are prohibited by law from giving legal advice.