Achieving stardom at an early age is the dream of many child entertainers and their parents. But with fame comes a fortune that parents must properly manage. Coogan Accounts may play a key role.
When child entertainers and athletes achieve financial success, unique considerations come into play, from financial demands to fiduciary requirements and labor laws. For parents of a rising star, it’s essential to carefully manage their child’s finances. The entertainment industries are notoriously fickle, and you want to make sure your child’s early success leads to a financially secure adulthood.
One of the most important first steps is to consider a Coogan Account, more formally known as a Blocked Coogan Trust Account. Originally established to protect child actors in California from unscrupulous parents, the laws surrounding these special trust accounts have been updated in certain states to reflect the changing nature of the entertainment industry. Coogan accounts are now required for many minors who render creative services, with some notable exceptions.
Coogan Accounts: A Brief History
Starring alongside Charlie Chaplin in The Kid, Jackie Coogan became the film industry’s first child superstar. By the time he reached adulthood, however, his mother and stepfather had squandered every cent he’d earned. That led to a high-profile lawsuit and prompted California to enact the first legislation to protect child performers. Known as the Coogan Act, it stipulates that 15% of a child performer’s earnings must remain in trust for them until the child reaches adulthood.1
The Coogan Act provides that a trustee manages the funds set aside for the child in accordance with strict investment guidelines. In California, for example, investments in Coogan accounts can only be made in government bonds and securities, certain cash instruments and broad-based equity mutual funds from large management companies.2
Who Needs a Coogan Account
Laws similar to the Coogan Act of California are in place in New York, Illinois, Kansas, Louisiana, Nevada, New Mexico, North Carolina, Pennsylvania, and Tennessee. There are minor differences in their statutes, but all require the establishment of a Coogan Trust before issuing a work permit to a child performer.3 These laws pertain not only to residents of those states, but to any child who renders creative services within the state, including actors, models, singers, authors and athletes.
Who Doesn’t Need a Coogan Account, Yet
Currently, social media stars, or “influencers,” are not subject to child entertainer labor laws and are not mandated to open Coogan accounts in any state.3 This is no small exception. Young celebrities who publish their content on the internet and social media platforms have rapidly become some of the highest-paid children in the entertainment industries.
In 2023, Illinois became the first state to expand Coogan account rules to include influencers conducting work or business in the state. That law will go into effect in July 2024. Lawmakers in California and Pennsylvania have also considered similar proposals.4 As child advocates continue to press for tighter controls over child labor in online media, additional legislation in other states may expand the Coogan Act to cover social media in the coming years.5
Legal Considerations for Child Actors
Most, but not all, U.S. states require minors to obtain work permits before accepting professional employment. These laws vary greatly from state to state, with different age requirements, work limitations, required documentation and issuing authorities.6 (You can look up the rules for your state at https://www.dol.gov/whd/state/certification.htm.)
While parents should try to apply for a work permit before their child begins auditioning to avoid delays, many states will issue a one-time, short-term temporary work permit that can be obtained if their child is suddenly gets a role and has not previously received a work permit.
Even with a work permit, child actors are subject to limits on the amount of time they can work or be on location for a given project. In California, for example, these range from a maximum of 20 minutes a day for infants younger than six months old, to full adult work days for those older than 15 ½ who have graduated from high school. State laws mandate hours for education, meals, and rest periods. There are also regulations governing who must be on set to supervise the child.
Seek Experienced Guidance
Morgan Stanley’s Global Sports & Entertainment division has extensive experience helping parents and guardians establish Coogan Trust Accounts. The division is also listed as one of the few financial institutions that offers this type of blocked trust account for minors by the Screen Actors Guild-American Federation of Television and Radio Artists, the union representing commercial actors.
If you need help or have other financial questions about your child’s acting or athletic career, consult a Morgan Stanley Global Sports and Entertainment Director.
