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Individual Development Accounts (IDA)
IDA are trust accounts established only for specific purposes which include, but are not limited to:
- Post Secondary Education Expenses. Payments are made from an IDA directly to an eligible educational institution.
- First Home Purchase. Qualified acquisition costs with respect to a qualified principal residence for a qualified first-time home buyer and if paid from an IDA directly to the individual(s) to whom the amounts are due.
- Business Capitalization. Payments made from an IDA directly to a business capitalization account, which is established in a federally insured financial institution and is restricted to use solely for qualified business capitalization expenses.
Qualified entities such as the following act as trustees:
- Not-for-profit organizations that are exempt from taxation under Section 501(c) or 501(a) of the Internal Revenue Code.
- A State or local government agency acting in cooperation with a not-for-profit organization described above.
Exempt
Funds retained and interest accrued in IDAs established by and for individuals eligible under CalWORKs are exempt. Deposits to IDAs must be made from earned income only. Income tax refunds may also be deposited into IDAs.
The trust remains exempt as long as deposits are being made to the IDA or funds are maintained in the IDA, whether or not the individual or any family members remain eligible for CalWORKs.
Nonexempt
If funds are withdrawn from an IDA and used for another purpose, the amount withdrawn is considered property. There is no income exemption for earnings prior to their deposit into an IDA.
Verification
To verify the existence of an IDA, EWs must retain and scan a copy of IDA trust documents and documentation of deposits and withdrawals into IDM. The EW must also verify that the individual who created the IDA trust account was eligible for CalWORKs at the time the IDA was established.
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