Child Actors – Coogan Accounts
I run a small private school. A number of our students are actors. In California, they are required to have Coogan Accounts. As I understand it, a Coogan Account is a blocked trust fund into which a portion of the child's earnings must be placed. The funds cannot be accessed before the age of 18. The parents are the trustees and they can invest the funds, but there are restrictions. Allowable purchases are:
(A) investment funds offered by a company registered under the Investment Company Act of 1940, provided that if the underlying investments are equity securities, the investment fund is a broad-based index fund or invests broadly across the domestic or a foreign regional economy, is not a sector fund, and has assets under management of at least two hundred fifty million dollars ($250,000,000); or (B) government securities and bonds, certificates of deposit, money market instruments, money market accounts, or mutual funds investing solely in those government securities and bonds, certificates, instruments, and accounts, that are available at the financial institution where the trust fund or other savings plan is held, provided that the funds remain in trust at a financial institution insured by the FDIC, SIPC, or NCUSIF if within the United States or maintained in a first-class international bank if not within the United States; provided that those purchases have a maturity date on or before the date upon which the minor will attain the age of 18 years, and provided further that any proceeds accruing from those purchases be redeposited into that account or accounts or used to further purchase any of those or similar securities, bonds, certificates, instruments, funds, or accounts.
With such rules it does not seem that there would be any way for parents to invest in PMs. Most of our parents just have the money sitting in a bank, and age 18 is a long ways off for many and there are large sums of money to be lost.
Perhaps there are no great ideas, but does anyone have any ideas on what might be a way to hold as much value as possible in these deposits? Appreciate any comments.
If the law sets aside 15% of gross wages into a Coogan account, then there are other avenues that good parents can pursue to safeguard earnings for the child's remaining portions.
For example, I once read an article in Kiplinger's that talked of a 9-year-old kid who did a lawn-mowing and yard-work service for a summer, and started a Roth IRA with $900 of his earned income.