Although opening a savings account for someone else is a thoughtful idea, it's not always possible. You can't open a bank account for another adult unless you have power of attorney, for example, but you can add her to your savings account with her consent. You also may name her as a beneficiary to your account, which doesn't require her signature. If the other person is a minor child, you can open a special type of account designed for saving.
Accounts for Minors
A custodial account is an account set up specifically for minors under the Uniform Transfers to Minors Act. Parents, grandparents, relatives and close family friends often open custodial accounts to help save for a child's future. Anyone can contribute to the account for the benefit of the child. However, once deposits are made, they are irrevocable. The minor can't access the funds until her 18th or 21st birthday, depending on the account and the state's laws.
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You can open this type of account at any bank or credit union. There's no regulatory minimum deposit required to open the account, but banks often set their own required minimums, such as $200.
You'll need to produce the child's Social Security number when opening the account to ensure ownership and proper tax reporting. The first $950 in interest earnings isn't taxed. The next $950 in earnings is taxed at the child's rate, which almost always is lower than the parent's rate. Once interest exceeds $1,900, it's taxed at the parent's rate.
Adding an Adult to Your Account
You can't open a savings for an adult, but you can add the adult to your bank account as a joint account holder. Every bank has its own requirements for adding another party to an account. Generally, you and the other person will need to stop in to your local branch, provide identification and complete the required paperwork. Some banks may allow you to add a name online or by mailing in the necessary paperwork and documents.
You also can name the adult the payable-on-death beneficiary, which means the funds in the savings account automatically transfer to that person upon your death. You won't need the other party present to add a beneficiary to your account. You'll just need to let the bank know you want to add a beneficiary to your savings account by providing his full name and Social Security number.
Power of Attorney
Power of attorney is a legal document giving you the right to make financial decisions on someone else's behalf. If you have power of attorney over another adult, you're responsible for managing his finances, which requires you to keep his money separate from yours. To open an account for him, you'll need to bring your power of attorney document and your photo identification to the bank. The account generally is in the name of the person you have power of attorney over, but some banks may require the account to be in your name. Check with the bank for specific requirements and procedures.