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Back Story

A family member suffered and injury while working a state job and after years of fighting the state they received a disability settlement. Due to some money troubles they've had in the past the judge mandated a representative payee and I was chosen.

This family member is 40 and has no retirement so what I'd like to do is invest this money for them (a rather aggressive diversity of etfs/mutualfunds until they are close to needing to draw from it). The money is currently sitting in a bank account to which I am the custodian of. If I move the money out into an investment account it then becomes mine and I will be taxed on it.

Question

Is it possible to invest this money for them without it ever becoming mine? If so, how can I go about this? I'm currently thinking that a joint trust may be the only option.

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    Have you asked your broker about setting up an account in their name that you can contribute to (and withdraw from when needed)? Seems like you shouldn't need the complexity of a joint trust.
    – D Stanley
    Commented Aug 26, 2020 at 15:47
  • @DStanley this is one of the first things I did but since the person is not my child a typical custodial account would not work and that I would need to figure out another avenue so here I am :-)
    – Jacksonkr
    Commented Aug 26, 2020 at 20:35

1 Answer 1

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After hours of research & chatting with the SSA about this it seems that there are limited ways around this.

  1. any money to be saved can only be put into a savings account which has a rate of return that will never go below 0 at any time.

  2. money saved can by "gifted" to friends/family but must be down so with the written consent of the payee. The money gifted must be documented on the monthly ledger and given to the IRS in the yearly "soft" audit. Signatures must be presented in case of a "hard" audit. The "gifted" money can then be invested as seen fit. Keep in mind that a Payee can complain to SSA if they feel they've been misled which could result in fines & jail time for the representative payee.

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