Coogan Accounts What protects child actors and their parents

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18 Νοε 2013 (πριν από 3 χρόνια και 8 μήνες)

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Coogan Accounts

What protects child actors and their parents

Presented by

f
inancial filosophy

F. John Deyeso, CFP®

www.financialfilosophy.com

John@financialfilosophy.com

917
-
916
-
2207

Disclosure


f
inancial
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.


Gary Coleman



Best known as Arnold from “
D
ifferent 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

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 ($47,617,344.96 in today’s 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

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

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

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 child’s 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


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

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


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


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


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


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.

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

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

Investments within Coogan Accounts


Do not “chase” investments, “hot”
investments


Understand that at age of majority this is your
child’s money, they earned it, and have a right
to it.


Your job as a parent is to protect it, by
investing it well

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




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


Using Coogan Accounts for future
goals


Many parents will want the money to go
toward a child’s 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

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 child’s 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


Important websites


NY Department of Labor


http://www.labor.state.ny.us/



Worker protection (top)



Child Performer (left
)


List of
Coogan

Banks


http://www.childreninfilm.com/images/cooganbankb
ook.pdf



SAG Credit Union


http://www.aftrasagfcu.org/



financial
filosophy


www.financialfilosophy.com