Coogan Accounts: What You Need to Know

When a young model or actor first books a TV commercial or part in a film, parents often don't anticipate their full earning potential. This can mean they sometimes wait too long to seek help from a wealth planner to create a savings plan for the child or even establish a process for handling their incoming revenue.

But the nuances of managing a child's income extend far beyond simple budgeting and saving. Child protection laws, business structure and tax considerations can complicate managing money for these rising stars.


What Is a Coogan Account?

A Coogan account is a type of protected savings account that is set up for child performers by their legal parents or guardians. Its main purpose is to protect a portion of the child's earnings until they become adults.

In California, New York, Louisiana and New Mexico, parents or guardians are required to open a Coogan account at a participating bank, like City National Bank, before their child can qualify for a work permit.

This account acts as a financial safety net that prevents parents or third parties from irresponsibly spending their child's hard-earned money before that child can have a say in the decisions.

History of The Coogan Law

California's Coogan Law is named after Jackie Coogan, a child star of the 1920s who later became familiar to TV audiences for his role as Uncle Fester in the 1960s sitcom, "The Addams Family." The law stemmed from Coogan's personal experience with family financial mismanagement.

Coogan's career took off after he appeared alongside Charlie Chaplin in 1921's The Kid. His subsequent acting jobs earned him a considerable fortune. Yet when he turned 21 in 1938, Coogan discovered that his earnings from his successful career as a child actor had been entirely spent by his mother and stepfather.

This revelation led to a legal dispute, in which Coogan was only able to recover a fraction of his earnings.

The case exposed the financial vulnerabilities faced by child actors and became the catalyst for the establishment of California's Coogan Law in 1939. This law mandates the creation of a blocked trust account, commonly known as a Coogan account, for child performers. Into this account, 15% of the child's earnings are automatically deposited and protected until the child turns 18.


Who Needs a Coogan Account?

A Coogan-style account is required in certain states for child performers like actors, singers, authors and athletes.

States with account requirements for child performers include:

  • California
  • New York
  • Illinois
  • Louisiana
  • New Mexico

Note that each state mentioned above has different laws concerning Coogan accounts, including what types of accounts parents need to set up for their child performers.

The term "Coogan account" is a blanket term that has been colloquially used to describe an account meant to protect the earnings of young performers. For example, New York doesn't use actual Coogan accounts. Instead, the state uses Uniform Transfer to Minors Act (UTMA)- or Uniform Gift to Minors (UGMA)-compliant trust accounts that operate in a manner similar to Coogan accounts.


Coogan Accounts & Child Influencers

As advocates fight for tighter regulations over child labor within the online media space, there is growing momentum in the 21st century to extend provisions of the Coogan Act to include social media influencers. These changes aim to ensure financial protection and labor regulation for young talent across all media platforms.

Illinois is leading the way with a new law aimed at protecting minors under 16 who appear in monetized digital content, such as video blogs, also known as vlogs. This legislation is seen as a foundational step that could potentially inspire more states to take similar action.

The nature of social media has brought challenges when it comes to child influencers. For example, family social media accounts can drive considerable earnings for the parents who run them. The new Illinois law aims to protect the earnings that children help generate simply by being part of these families.

While this law shares similarities with California's Coogan Act, it stands out as the first to extend such protections to minors engaging in online performances, which is not covered by the national Fair Labor Standards Act or any other state laws.

Under this new legal provision in Illinois, content creators are mandated to reserve a specified portion of the earnings gained from content that uses the “likeness, name or photograph of the minor," ensuring the minors can access their fair share when they reach adulthood. The allocation of funds is contingent on the extent to which the minor is represented in the content, even if their image is not explicitly displayed.


How Do You Open a Coogan Account?

Opening a Coogan account is a generally simple process. To start the process, you'll need to gather some important documents and information including:

  • The child's Social Security number.
  • The child's birth certificate.
  • Proof of audition or employment in the entertainment industry.
  • Proof of your identity as the child's guardian.

Typically, parents must prove the existence of a Coogan trust account before obtaining a work permit for their minor. Once employment begins, the employer is required to deposit 15% of the minor's gross earnings into the Coogan account within 15 days. It is the parent's responsibility to provide the employer with the Coogan account number.


Legal Considerations for the Coogan Law

As mentioned above, Coogan laws can vary from state to state.

For instance, in California, parents must open a Coogan account with a bank located within the state. On the other hand, states like Illinois, Louisiana, New Mexico and New York offer flexibility to allow accounts to be set up outside their boundaries, whether with a bank, credit union or brokerage firm.

Each of these states carries its own set of unique guidelines. For clarity on these specific rules, contact your state's Labor Department or find relevant links on the SAG-AFTRA State Statutes page.


Coogan Accounts FAQs

Coogan accounts ensure that a portion of your child's earnings remains untouched and waiting for their future. As guardians and young artists venture into the entertainment industry, understanding the specifics of these accounts can help in making informed decisions and ensuring compliance with established regulations.

What Are the Rules of a Coogan Account?

A Coogan account has specific rules designed to protect the financial interests of minor performers:

  • Mandatory Allocation: 15% of the child actor's gross earnings must be set aside in this account.
  • Employer's Obligation: Employers are legally bound to deposit that portion of the child's earnings directly into the Coogan account within 15 days of employment.
  • Strict Withdrawal Restrictions: The funds are untouchable until the child turns 18, becomes legally emancipated or if a court order is received.
  • Account Setup: Parents or guardians must set up the Coogan account within seven business days of the child commencing employment.
  • Usage of the Remaining Earnings: The other 85% of the earnings not deposited into the Coogan account can be used for the child's living and educational needs and career-related expenses.
  • State-Specific Laws: Requirements for Coogan-style accounts can vary from state to state, so consult with an expert to learn more about your state's laws.

Is a Coogan Account a Trust?

Yes, a Coogan account is a trust. More specifically, it's a blocked trust account designed for minors. Its primary purpose is to protect the earnings of young performers until they are legally adults.

Can You Take Money Out of a Coogan Account?

No, funds cannot be withdrawn from a Coogan account until the minor turns 18 years old. Other states with Coogan-style accounts might have different age requirements. The only exceptions to this rule are if the minor has been emancipated or if there is a specific court order allowing the release of the funds. This restriction ensures that the money is kept secure for the benefit of the child actor until they reach adulthood.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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