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Opening Benefit Accounts

September 3, 2020 1:34 pm

By Donya Parrish, MCU VP- Risk  Management

When a member becomes ill, community members and friends often step up to help. That might involve a request at your credit union to open a benefit account. Those can tough because the people setting it up have good intentions, but those accounts can also be ripe for misuse of funds.

How do you protect the intended recipient and credit union, while assisting in the request?

One recommendation is to set it up with the sick person as account owner. Checks will likely come in payable to them anyway, and should to ensure they go to intended target. If a friend or family member is going to be managing the funds and account, they can be added as an agent, similar to an authorized user. That gives them access but no ownership, during life or after death. The account can still have a POD so a spouse or children etc. can receive funds in case they don’t pull through.

Instruct those running fund raisers and collecting funds to ask for checks to be payable the way you would like them. For example, payable to “John Doe” with “benefit account” in memo line or such. If payments are instead made to the organizer, they should be endorsed over to the account owner before deposit.

The identification of parties really only needs to be on those transacting, so if John Doe is too ill to sign paperwork and no one has power of attorney for him, you may still be OK with proceeding. Just remember to check your credit union’s policies to see what they allow.

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