Can a relative put money in an IRA account for a child, then pull the money out later for personal use?

Question

I have a sister that placed $10,000 in an account for my son, after a relatives death. She was in charge of the relatives trust, and supposedly abided by the trusts request to give my son the $10,000. She opened an account placed the $10,000 in the account, and made herself the custodian of my son's account. She then took that $10,000 out after a couple years, and used the money for her own personal use, to keep up with her phoney lifestyle, while closing out the account. . Is this legal? What legal rights do I have to get my sons money back? How do I get a hold of the trust? Is it worth it? Any advice would be appreciatted. Thank you

Answer 1

It all depends on the type of account that was opened. I doubt it was an IRA, since IRA accounts can not be opened for a child (with the exception of an educational IRA- but I am pretty sure that 10k exceeds the annual limit set for those). It maybe sounds like it was a Gift to Minors or Transfer to Minor account, especially if she was the custodian. Some accounts the custodian is free to take out the money as he/she wishes (dependent on the account, not any trust rules that were set).You should have been given a copy of the trust when the relative passed away, since you are the legal guardian of one of the heirs. Your best bet would be to obtain a copy of the trust document and contact an attorney.

Answer 2

You better see a lawyer. As far as withdrawing the money, it depends on whose names were on the acct. and was it John AND Mary - or - John OR Mary.
As far as the trust... you need a lawyer to check on the wording.