Investment of the Minor’s Assets
Section 64.2-1501, Code of Virginia (1950), gives the guardian of the property of a minor a reasonable period of time to invest the principal assets that he has received on behalf of the minor. This period is a “reasonable period of time” which shall not exceed four (4) months.
Investment by the guardian in accordance with the provisions of Sections 64.2-1502 and 64.2-781, Code of Virginia (1950), may provide a safe harbor for the guardian’s investment decisions. Special consideration should be given to the factors set forth in Section 64.2-782, Code of Virginia. Investment in interest bearing federally insured bank accounts is proper. Purchase of long term certificates of deposit paying a higher rate of return may be appropriate, however, you must consider the minor’s age and the maturity date of the certificate. The minor should receive the assets free of restriction at age 18 and should not have to incur a penalty to redeem a long term certificate of deposit.
Investments in resources other than those set forth in those statutory provisions, without the prior consent of the Court or Commissioner of Accounts, may be determined by the Commissioner of Accounts to be improper investments made on behalf of the minor. Investments approved by statute provide a degree of protection for the guardian. Investment is high risk or speculative investments on the expectation of high rates of return is totally inappropriate. Preservation of principal is paramont in a fiduciary situation, especially a guardianship. While the return on principal may not be as high as other investments, the risk involved in losing the principal value of the assets is of primary concern in the protection of the minor’s interest in the initial principal balance. Therefore, a more conservative and diverse investment strategy should be employed. Day trading is not an acceptable practice.
A guardian shall not borrow money belonging to the minor, and will be penalized for such borrowing of the minor’s assets.
The guardian shall not lend money to any third party on an unsecured basis. It is best procedure that no money be loaned to a third party without prior consultation with the Commissioner of Accounts, as this practice is strongly discouraged.
Assets of the minor should be titled in the minor’s name with the name of the guardian for the benefit of the minor. The social security number of the minor is the correct federal identification number to be used for all tax purposes. The guardian’s social security number should not be used on the account as interest or earnings will be reported to the IRS under the guardian’s name rather than the minor’s name. If multiple guardians are appointed, all guardians’ names should appear on all bank accounts. The minor shall have no authority to draw upon the account and the account should specifically state that prohibition.
The minor’s assets shall not be comingled with the guardian’s personal assets.