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 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 your 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 open a Coogan Account, more formally known as a Blocked Coogan Trust Account. Originally established to protect child actors in California from unscrupulous parents, the state laws surrounding these special trust accounts have been updated to reflect the changing nature of the entertainment industry. Coogan accounts are now required for most minors who render creative services, with some notable exceptions.
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 be held 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 are limited to government bonds and securities, certain cash instruments and broad-based equity mutual funds from large management companies.2
Laws similar to the Coogan Act have now been enacted in New York, Louisiana and New Mexico as well as California. There are minor differences in their statutes, but all of these states require a Coogan Trust to be established before a work permit will be issued 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.
Currently, social media stars, or “influencers,” are not subject to child entertainer labor law and are not mandated to open Coogan accounts in any state.3 This is no small exception. Young celebrities who publish their content on Internet platforms have rapidly become some of the highest-paid children in the entertainment industries.
In 2018, California lawmakers considered a bill that would add “social media advertising” to the definition of employment in child entertainment law, affording “kidfluencers” the same essential protections as children who work in traditional media. But critics felt the version of the bill that ultimately passed was watered down, exempting minors if their social media performances are unpaid and shorter than an hour.
As child advocates continue to press for tighter controls over child labor in online media, additional legislation may expand the Coogan Act to cover social media in the coming years.4
Most, but not all, 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.5 (Look up the rules for your state.)
While it’s advisable to apply for a work permit before your child begins auditioning, many states will issue a one-time, temporary work permit that can be obtained if your child is suddenly cast and has not previously been issued a work permit.
Even with a work permit, child actors are subject to limits on the amount of time they can work or even be on location. In California, for example, these range from a maximum of 20 minutes a day for infants younger than six months, to full adult work days for those over age 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.
Morgan Stanley’s Global Sports & Entertainment division has extensive experience helping parents and guardians establish Coogan Trust Accounts. It’s also one of the few financial institutions recommended 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 Sports and Entertainment Director.