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Coogan Accounts What protects child actors and their parents Presented by financial filosophy F. John Deyeso, CFP®

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Presentation on theme: "Coogan Accounts What protects child actors and their parents Presented by financial filosophy F. John Deyeso, CFP®"— Presentation transcript:

1 Coogan Accounts What protects child actors and their parents Presented by financial filosophy F. John Deyeso, CFP®

2 Disclosure financial filosophy is a registered investment advisor operating under the jurisdiction of the State of New York. This presentation is for informational purposes only and does not constitute a complete description of our investment services or financial planning advice or practices. This presentation is speaking informational about various financial topics and is in no way investment advice or financial planning. Investment advice or comprehensive financial planning would require individual work based on individual aspects and not generalizations. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness. THERE ARE NO WARRANTIES EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION PRESENTED. THIS IS ALSO NO WAY LEGAL ADVICE.

3 Gary Coleman Best known as Arnold from Different Strokes – Sued parents for mis-management of his $8.3 million dollar Trust Fund – Argued successfully that his parents had accumulated $770,000 for themselves – Later filed for Bankruptcy

4 Jackie Coogan Jackie Coogan-famous child star in silent picture era. – Best known staring with Chaplin in The Kid – At 21, he demanded his earnings from his parents – $4,000,000 in 1935 ($47,617, in todays dollars) – They refused, and had only about $200,000 left – Later sued and received slightly more than $100,000 ($1,190,433) 2.5% of his earnings – Under California Law, Jackie had no rights to the money he earned. – The law was later changed, trust accounts for child actors are now called Coogan Accounts

5 Parents versus Kids Parents accused of mismanagement often claim 2 defenses – To the child it was simply playing – The financial strain on the family Children – Numerous child actors have acknowledged the lack of play and that they were working

6 The life lesson While the child may have a passion for performing, this is a business The actor is being compensated for missing out on normal child activities While there may be family sacrifices to allow your child to follow their passions, this is true for many families and not specific to acting Do you think Tiger Woods paid for his golf lessons as a child, or travel expenses to golf events? I think not DO NOT let money strain your relationship with your child. Coogan accounts were designed to protect the child actor I think they protect the family as well

7 California Coogan Law Enacted in 1939 after the public outrage of the Jackie Coogan case. Requires the production company to directly deposit 15% of income directly into the childs trust account. A parent or guardian will be Trustee of the account. Withdrawals are not permitted (blocked trust). The funds must be turned over at the age of Majority. In California age 18 (New York 21) Residency does not matter, if work originates in California then a Coogan Account is required

8 What Coogan information MUST be provided The following two documents MUST be provided with the work permit – The Trustee Statement – The deposit instruction – Some Banks provide these two forms as one. – Regardless, remember the Bank is holding the funds, you are the trustee and in charge of overseeing that the funds get deposited

9 Trustee Statement The law indicates that the following information should be on a Trustee Statement: Name, Address & Phone # of Financial Institution Name of Minor (beneficiary) Account Name Account Number Trustee Name Signed under penalty of perjury by trustee

10 Deposit Instructions Usually given to the 2 nd AD or whoever is in charge of payroll Contains the following information Financial Institution Logo Name of Account Name of Minor Name of Trustee Routing Number The account number Social Security Number Financial Institution contact information

11 Submitting the proper paperwork Work Permits, required in New York and California are valid for 10 days without Coogan information, will be voided if Coogan Information is not provided to the production company

12 Parental Due Diligence Since the Coogan laws only currently apply to California and New York, not all payment processors know how to process this payment – Check the paystub for a withholding equal to 15% of earnings. Likely mislabeled – If missing payment, contact the production company – If more than 180 days have passed check with the Actors Fund

13 New York Coogan-Like Passed in March of 2004 Child Performer Education and Trust Act of 2003 Same 15% deposited directly into an account for the child. Turned over to the Child at the age of Majority (New York this can be 18 or 21 depending of account) Once account reaches $250,000 a trust company must be appointed as Custodian.

14 East Coast versus West Coast The difference between NY and CA California, with the creation of the Coogan account requires a blocked trust. Meaning that the money in the account cannot be spent New York requires, a California Coogan Account, A New York UGMA or UTMA The problem with UGMA and UTMA accounts, they can be spent, if the expenses are for the child. Meaning these type of accounts are not Blocked Trusts

15 Why California Coogan Accounts are best! California will not honor a New York Coogan-like account If work originates in California, you will be required to open a Coogan Account. If you already have a NY Coogan-like account, you will now have two accounts that cannot be combined unless into the California Coogan. More difficult to manage from an investment standpoint Coogan accounts remove the temptation to use the funds for acting expenses NY Coogan-like accounts later likely be challenged and changed in the Courts

16 Investments within Coogan Accounts Do not chase investments, hot investments Understand that at age of majority this is your childs money, they earned it, and have a right to it. Your job as a parent is to protect it, by investing it well

17 Investing well Diversification across asset classes(companies) – Example – U.S. domestic equity fund (small, medium large) – International equity fund – Global bond fund Doing it cost effectively (low expense ratios, index funds) Reduces trading and commissions Risk decreases as the child gets closer to the age of majority

18 Investing well Diversification is NOT owning ALL the OIL stocks or ALL the TECH stocks Two unique problems in investing – The cash flow into the account is not know – Achieving diversification without a known future cash contributions A solution- fee-only third party advice, protects parents and children

19 Using Coogan Accounts for future goals Many parents will want the money to go toward a childs future goals (i.e. College) Problematic – The impact to financial aid – The child earned the money and little can be done to prevent them for using it as they want – At 18, even 21, what they want to use it for and what you want them to use it for may not agree – They earned it, they win if there is a disagreement

20 The best a parent can do Place assets in a blocked trust Hire outside fee-only Certified Financial Planner Professional to help with investment management Keep the children involved in the whole process (involvement increases with age) This protects the childs assets, protects the parent/child relationship and decreases the chance that the child will simply blow the cash They still may not go to college with that money, but they still may not blow it

21 Important websites NY Department of Labor – – Worker protection (top) – Child Performer (left) List of Coogan Banks – ook.pdf ook.pdf SAG Credit Union – financial filosophy –


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