Help me with these third-party personal checks!

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
This is driving me bananas and I'm hoping someone can help me. A relative made a very generous gesture and wrote each of my two young children a personal check (in the child's name) for $5,000 for their education funds. Neither of them have a checking or savings account. My bank (Bank of America, which I so dislike) will not let me cash them myself because the amount is too great. Fidelity will not accept a third-party check over $2,500, so I can not have them deposited directly into their 529 accounts. Without having to ask the relative to reissue checks in my name or something like that, would the easiest thing be to open a joint account with me and both of my children, cash both of the checks, and then transfer the money into their 529 accounts?

Member Summary
Most Recent Posts
I appreciate all the advice. One of the things I really wanted to avoid was asking for a new check or an electronic tran... (more)

savoirfaire (Mar. 28, 2017 @ 12:26p) |

Did that a few years back for one of our kids when savings rates were still decent. But nowadays it's hard to show the k... (more)

Shandril (Mar. 29, 2017 @ 9:17a) |

It's a good idea to have accounts in their names anyway, for occasions just like this one.  I like CapOne 360's kids sav... (more)

dcwilbur (Mar. 29, 2017 @ 9:23a) |

Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

I had this happen once before.  It wasn't as much money, but I just endorsed the check "For Deposit Only to Fidelity" then used mobile deposit to deposit it to MY own account at Fidelity, then sent my 529 contribution from there after I saw that the cash was available and waited a few days to make sure there were no issues.  Alternatively, you might go into a branch at the bank that is on the check-if they have branches near you.

Why does it have to be done by check? Ask your relative to send the money to you electronically. Then you transfer the money to the 529 account and tear up the checks.

raringvt said:   I had this happen once before.  It wasn't as much money, but I just endorsed the check "For Deposit Only to Fidelity" then used mobile deposit to deposit it to MY own account at Fidelity, then sent my 529 contribution from there after I saw that the cash was available and waited a few days to make sure there were no issues.  Alternatively, you might go into a branch at the bank that is on the check-if they have branches near you.
  They do tend to review large deposits made via the mobile app.

Open a checking accounts?

All the the following isn't legal advice, and doesn't imply you have anything but the most honest of motives.

- The money is technically belongs to the kids, so it shouldn't be transferred into your account, so technically it can't be spent on essentials.
- The best way to handle it is to open a Unified Transfer/Gift to Minors account (UTMA/UGMA) with you as the custodian, and they can claim it when they turn age of majority. Obviously this counts towards FASFA assets, but Meh. Also you control assets until then.
- Yes, they could open a 529 account, but the checks might need to get rewritten.
- Most institutions don't like opening accounts in individual minors... see Bart Simpson check writing episode.

I've had a similar issue before.

My solution - child endorsed the check, parent endorsed below, "For Deposit Only" and the account number below... then deposited the check in the ATM.

Newb question: wouldn't the 529 accounts be in the children's names? Then it isn't 3rd party at all for the deposit...

I agree but take child into your family bank which you have a good relationship with personal banker. Take any available identification for each child. Have child make their marks followed by your signature and deposit into the family account. IF you have plenty of money in the family account, AFTER these checks have been deposited, if Fidelity accounts are properly set to draw from the family account, make the transfers electronically. Otherwise, allow plenty of time for the funds to clear. Wait a few days beyond that and make the transfers into the 529 accounts.
Due to the amounts involved, I would NOT use the ATM.

Just open a free minor savings account in their name with you as the guardian. Deposit check, do as you wish.

ThomasPaine said:   
- Most institutions don't like opening accounts in individual minors... see Bart Simpson check writing episode.

  Almost all banks have a minor savings account.  Yes, you don't get checks to write but you can deposit all the checks in their name as you wish.
 

BoA sucks, AGAIN!

this scenario isn't that usual yet they have to be d*ck about it.

Perhaps change your account to joint with child as joint owner, deposit check, then undo change.

ZenNUTS said:   BoA sucks, AGAIN!

this scenario isn't that usual yet they have to be d*ck about it.

  
Not sure why you guys are dissing BofA - they are just protecting themselves - dont see any reason why they should let a ckeck made to person A be deposited in person B's account. Recently Capital One wouldnt let wouldn't let made to A&B be deposited in A's account.

BTW - it was a mobile deposit and they obviously verified and rejected. Amount was 10K.

My dad never had any problems depositing a check that was previously endorsed by the payee.

Tedious and slow method: work hard in a number of ways, including opening temp. UTMA/UGMA accounts for each child, then transfer to 529 Plans. IMO it's unnecessarily tedious to do it that way even if that feels like the more natural way to do the gift.

Better and faster method for OP: Have relative rewrite check (or ACH) to you, you deposit it, and then you open 529 Plans for your kids with the money. The amounts will count towards FAFSA but it's straightforward.

Best method (provided you're sure that relative are not gonna change their minds until kids get to college) and in any case, best method for the generous relative: have the relative open 529 Plans with $5k each with your kids as beneficiaries. No issue funding those with ACH transfers or checks. Will not count towards the kids FAFSA calculations. Main issue is that it's not your money nor the kids' to control and beneficiaries could be changed any time. As the gifting relative, this is totally what I would do since I'd retain control of the money and I know it would not affect their ability to get need-based scholarships.

stanolshefski said:   My dad never had any problems depositing a check that was previously endorsed by the payee.
  That was a common thing many moons ago, not so much these days.

savoirfaire said:   This is driving me bananas and I'm hoping someone can help me. A relative made a very generous gesture and wrote each of my two young children a personal check (in the child's name) for $5,000 for their education funds. Neither of them have a checking or savings account. My bank (Bank of America, which I so dislike) will not let me cash them myself because the amount is too great. Fidelity will not accept a third-party check over $2,500, so I can not have them deposited directly into their 529 accounts. Without having to ask the relative to reissue checks in my name or something like that, would the easiest thing be to open a joint account with me and both of my children, cash both of the checks, and then transfer the money into their 529 accounts?
  To be clear, you want to deposit them into your account, not actually cash them, right?  Because under most circumstances no bank is going to actually cash a $5k check, let alone for a third party.  And I'm not sure I understand why a check made out to the child would be "third party" when depositing it into the child's own account?

I can't believe Fidelity would reject the deposit made directly with them.  Or deposit them in your own account using a BofA ATM and it'll likely not be an issue (but if it is returned, you'll need the relative to write new checks).  Or open your kids a savings account, deposit the checks, then transfer the funds to the 529 accounts.

Glitch99 said:   
savoirfaire said:   This is driving me bananas and I'm hoping someone can help me. A relative made a very generous gesture and wrote each of my two young children a personal check (in the child's name) for $5,000 for their education funds. Neither of them have a checking or savings account. My bank (Bank of America, which I so dislike) will not let me cash them myself because the amount is too great. Fidelity will not accept a third-party check over $2,500, so I can not have them deposited directly into their 529 accounts. Without having to ask the relative to reissue checks in my name or something like that, would the easiest thing be to open a joint account with me and both of my children, cash both of the checks, and then transfer the money into their 529 accounts?
  To be clear, you want to deposit them into your account, not actually cash them, right?  Because under most circumstances no bank is going to actually cash a $5k check, let alone for a third party.  And I'm not sure I understand why a check made out to the child would be "third party" when depositing it into the child's own account?

I can't believe Fidelity would reject the deposit made directly with them.  Or deposit them in your own account using a BofA ATM and it'll likely not be an issue (but if it is returned, you'll need the relative to write new checks).  Or open your kids a savings account, deposit the checks, then transfer the funds to the 529 accounts.

  
His problem currently is he kids dont have their own account.  So when he tries to deposit it into his account, its a 3rd party check.  He is trying to get the money into a place where he can funnel it into his kids college fund(529 plan possibly). 

I agree with most of the other posters.  If it would be a hassle to get new checks written, then just open a saving account in each of your kids names with you as a co-owner, and then deposit the checks.  Let them sit for a couple weeks to be sure they clear, and then transfer the funds into the type of account you want them in.  Setting up each of your kids their own saving account is a good idea anyway.  Try to get them used to putting their bday/x-mas money in the bank along with any other money they earn, so they can get used to saving.

Shandril said:   Best method (provided you're sure that relative are not gonna change their minds until kids get to college) and in any case, best method for the generous relative: have the relative open 529 Plans with $5k each with your kids as beneficiaries. No issue funding those with ACH transfers or checks. Will not count towards the kids FAFSA calculations. Main issue is that it's not your money nor the kids' to control and beneficiaries could be changed any time. As the gifting relative, this is totally what I would do since I'd retain control of the money and I know it would not affect their ability to get need-based scholarships.
  One important note here- the relative owning the 529 will not count towards FAFSA calculations.  But if the child goes to a private university, they will ask about such accounts and that does affect the financial aid calculations.

Also note that said 529 will also negatively impact financial aid calculations at public universities if you use them right away- you probably need to pay at least the first year and a half from other sources in order to get the best aid possible, so make sure you have some money of your own if you go this route.

Call the 529 provider, they may be willing to accept a check made payable to a minor for deposit without any endorsement.  It will depend on their "3rd party check deposit policy."

ach1199 said:   
stanolshefski said:   My dad never had any problems depositing a check that was previously endorsed by the payee.
  That was a common thing many moons ago, not so much these days.

  He was still doing it as of a year or two ago, but that was a regular thing for him and the tellers expected it.

The one time a teller tried to stop him, he asked for his entire deposit back and waited for the next teller to open up.

I appreciate all the advice. One of the things I really wanted to avoid was asking for a new check or an electronic transfer instead. I'm probably being overly cautious, but it seems like it could come off as being a little ungrateful. The good news is that my Schwab brokerage was happy to deposit the checks into my account and then I can transfer the funds electronically into the 529. Having a relative retain ownership of a 529 sounds like a great idea that I will have to look into. In the meantime, I do plan to open a passbook savings account at a local bank just to give my kids the experience of saving!

savoirfaire said:   In the meantime, I do plan to open a passbook savings account at a local bank just to give my kids the experience of saving!
Did that a few years back for one of our kids when savings rates were still decent. But nowadays it's hard to show the kids a real-life example of savings/compound interest. Local bank savings account has a 0.15% interest rate and that's not as bad as some of the big box banks (yeah looking at you Chase with 0.01% APY rate!). Even then, unless you pour tons of money that's not theirs, the kids will only see pennies and a few dollars in interest. Not really a great incentive to put their money in savings rather than spend it.

So for our youngest kid, we just did the much more interest-friendly bank of mom and dad which offers him a 10% APY. Just be careful of having kids own lots of money eventually since assets in the kids' name are as bad as it gets for FAFSA calculations.

savoirfaire said:   In the meantime, I do plan to open a passbook savings account at a local bank just to give my kids the experience of saving!
It's a good idea to have accounts in their names anyway, for occasions just like this one.  I like CapOne 360's kids savings accounts.  You can open their accounts under an umbrella of a single login for you, but if they log in with their own credentials, they only see their account.  You can also get them a debit card that is set up as a separate account; you can move money from the savings to the debit card account, but they can't.  Oh, and it pays 0.75% interest.  Nice setup.   



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017