How to open a bank account for someone else #CashNews.co

It’s possible to open a bank account on behalf of another person, but only in certain circumstances. If you’re thinking about opening an account for a loved one to help them manage their money, here’s what you need to know about your options and the potential requirements to get started.

Can I open a bank account for someone else?

There are a couple of situations where you can open a bank account on behalf of another person:

• You’re a parent or guardian of a minor: Children who haven’t yet reached the age of majority — typically 18 years old — cannot legally open a bank account on their own. But if you want to help your child learn how to manage their money, you can open an account on their behalf. In fact, many banks and credit unions offer specialized checking and savings accounts for teenagers and even younger children.

• You have power of attorney or guardianship: A power of attorney (POA) or legal guardianship grants an agent authority to take certain actions on behalf of another person. Depending on the scope of the POA or guardianship, you may be allowed to open a bank account on their behalf.

Keep in mind that financial institutions will typically have stipulations to ensure you have the authority to open an account on another person’s behalf. Contact the bank before you start the process to make sure you understand the requirements.

Ways you can open a bank account for someone else

Depending on your situation, there are a few ways you can open a bank account for another person.

Open a joint account

A joint bank account is an account with two or more primary holders. With this option, both you and the other person will have equal access to the funds in the account. Opening a separate joint account from your primary account can be a good option if you want to keep your finances separate from the other person’s.

Add the person to your account

If you don’t want to open a new account, you can choose to add the person to your bank account, changing it from an individual account into a joint account. That said, this option is only worth considering if you don’t mind sharing your finances with the other person.

Create a custodial account

A custodial account is a specialized account that gives a parent or POA agent the authority to manage the funds for a specified period of time, such as when a child beneficiary reaches a certain age or the POA or guardianship is no longer in force.

You may also be able to set spending and withdrawal limits and create alerts so you can keep track of account activity. Unlike a joint account, however, the funds belong solely to the beneficiary.

Read more: Can non-U.S. citizens open a bank account?

What do you need to open a bank account for someone?

The process and requirements for opening a checking or savings account on behalf of another person can vary depending on the bank and the type of account you choose.

If you’re opening a checking or savings account for your child, for instance, you may be able to do so online. But if you’re opening a joint account or a custodial account with a power of attorney, you’ll typically need to visit a local bank branch.

Here are some of the details you’ll need depending on which option you choose:

• Joint account: You’ll need personal information for both account owners, such as full names, dates of birth, Social Security numbers, and photo IDs. Both parties may need to sign documents to complete the process.

• Adding an account holder: To start, you’ll need to verify that you’re the account owner, typically with a photo ID. Then, you’ll provide the personal information for the person you want to add, and they may need to sign certain documents to join the account.

• Child custodial account: If you’re opening a custodial account for a child, simply provide your and their personal details to the bank. If you’re the child’s parent, you may not be required to provide a birth certificate to prove it. However, if you’re a guardian, you may need to share original court documents designating you as such.

• POA or guardianship custodial account: You’ll typically need to provide a photo ID and original court documents verifying the POA or guardianship. You’ll also need to provide information about the person you’re opening the account for.

If you’re worried about not having all the information and proper documentation, contact the bank before you start the process to understand your options and the requirements.

Potential drawbacks to consider

Opening a bank account for someone else can be a key step in helping them manage their finances. Before you do, however, it’s important to consider some of the potential downsides:

• Added responsibilities: If you’re opening a bank account for someone else, that’s an additional account you’ll need to manage. You may need to set up recurring bill payments and ensure there are always sufficient funds to cover them, keep track of account activity, and be the point of contact with the bank when issues arise.

• Limited financial privacy: If you decide to open a joint account or add someone to your existing account, they’ll have full access and control over the account’s funds and transaction history.

• Lack of ownership: If you open a custodial account, you can help manage the funds, but you don’t have any ownership of the money in the account. For example, if you add money to a custodial account for a child, you can’t withdraw it later for use for your own purposes.

Depending on your situation, some of these drawbacks may not apply, or they may be unavoidable. Be sure to communicate with the account’s beneficiary to evaluate the best option for them.

The bottom line

You can open a bank account for someone else in certain situations, but the process and requirements can vary depending on the details of your circumstances. While a joint or custodial bank account can offer several benefits to the beneficiary, it’s also important to consider the potential pitfalls before you get started to ensure it’s the right move for both of you.