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I live in the United States, and I recently had a baby girl. My mother would like to give her some money by check, but the baby doesn't have a bank account yet. I've read that I should be able to endorse the check and deposit it into my account.

  1. Is that true?

  2. If that is true, would that count as a gift to me or to my daughter? (My mother has already given me money, and the combined amount might exceed the annual exclusion.)

(Or maybe it'd be simpler to just open a bank account for her.)

  • Congratulations on the new arrival! The SSN issue and UGMA/UTMA issue has been well-covered in the answers but one thing to keep in mind is that the UGMA/UTMA investments/bank accounts become your daughter's property when she turns 18, and she can buy a motorcycle with it if she so chooses instead of using the money for her college expenses. An alternative that Grandma might wish to consider is establishing a 529 college fund with her granddaughter as beneficiary. – Dilip Sarwate Dec 15 '16 at 16:23
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If you deposit the money in your account, it will count against the gift tax exclusion for you, not your daughter.

As such, you should open a bank account for your daughter. Assuming she already has a social security number, this will not be complicated. Otherwise, apply for one, as mhoran notes before the end of the year.

The kind of account you should open depends on the purpose of the money, but likely it should be opened as a Uniform Gift to Minors Act, or Uniform Transfer to Minors Act, account. This means it is your daughter's account (not yours), but you designate one or more custodians who are the ones who can actually make withdrawals. Any money in this account must be spent in your daughter's interest, but it's not required to be spent with her approval (even as an older child) nor on a specific thing (it's not just college money, like a 529 account is).

Before you do so, you should consider how to set up custodianship. Some parents simply make themselves custodians; some ask another relative to be custodian or joint custodian, or even someone like a godparent or close trusted friend. Having a joint custodian is helpful if you feel like it may be challenging to not dip into the account if you had financial difficulties (as both custodians must sign off on withdrawals).

Finally, you should consider whether you want this to be a simple bank account, or whether you might want to consider something like Vanguard or Fidelity investment account. If it's likely to contain over $10,000 or whatever the reduced/no fee limit is at the investment firm you choose, it may well be worth your while to do this as you can earn significant returns fairly safely, assuming the money is intended for longer term use (for college or other later-in-life uses).


Note that for tax purposes, this gift will count for 2016 taxes regardless of when you actually set up the account, as you have "constructively received" the gift when the check was given to you. So there's no rush to work this out before the end of the year; you can still deposit it next year. However, your daughter needs a SSN to be able to be claimed as a dependent on your taxes, so that at least needs doing before the end of the year.

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Quick get a Social Security Number for the child. You will need it before you file your taxes early next year. If you don't have a SSN for your child you will not be able to claim them as a dependent. If you applied for one already, many do so at the hospital, then wait for it to arrive.

The next step is to open a savings account with the child's SSN. Then have your parent write the check in the child's name and deposit it into the account. If it is written in the child's name already then you don't need a new check from them.

If the check is large, you may run into problems if you take a check in the name of a minor and try and deposit it into your account. The bank would have no idea that the person is related to you.

  • Although the last paragraph is principally correct, in reality the banks don't care much about who is named as the recipient on the check. If you deposit via the app, they take any check. – Aganju Dec 15 '16 at 12:25
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    @Aganju I can't speak for all banks but I have had more than one credit union I use reject a check deposit through their app because it was made out to one of my children and not to an account holder (myself or my wife). – homer150mw Dec 15 '16 at 13:54
  • Nearly all births in the US have social security numbers set up at the time of birth, so it's likely part 1 is already done. – Joe Dec 15 '16 at 15:41

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