How Can a Custodian Bank Account be Opened?

Custodian FBO
Question:
Our client in California received life insurance proceeds from her parents’ policy payable to her as custodian for her adult brother (“Jane Doe Custodian FBO Joseph Doe”). Jane’s bank will not open an account for her in this registration without her getting some sort of documentation from the clerk of the county court. Joseph receives Social Security and he has income from a job. Joseph handles his own money and has a life estate in the family home, so he pays no rent. Jane does not feel she needs a conservatorship or even a limited conservatorship. Is there another legal capacity for handling this portion of money for Joseph’s care that she can pursue?
Response:
This is difficult because it’s unclear what “Custodian FBO” means. “Custodian” is not a formal legal structure such as a trust. And while there are laws for parents and others to hold funds as custodians for minors, they do not exist for disabled adults.
I would read the beneficiary designation as the funds going to Jane to be held in her name and under her Social Security number with the direction from her parents to use the funds for Joseph. Under this interpretation, the money legally would belong to Jane. Her parents have just asked her to hold it for her brother’s benefit. It may make sense for Jane to shop around to see if there are other banks that would allow her to deposit the check into her own account.
If she can’t find one, she might have seek a limited conservatorship simply for the purpose of depositing the check. It’s also possible that the bank would allow the check to be deposited into an account opened for a special needs trust for Joseph’s benefit.
A third option might be for Joseph to appoint Jane as his agent under a durable power of attorney, if he is competent to do so. The bank may permit Jane to open account in her role as attorney in fact for Joseph. Legally, this would be Joseph’s money and the account would use his Social Security number, but Jane would manage the funds on his behalf.
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