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How Does the Uniform Transfers to Minors Act Impact Your Estate Planning?

Through the Uniform Transfers to Minors Act you can leave gifts behind for your child or any minor in a living trust or a will. This law has been adopted in practically every state across the country. The property manager for a child is known as a custodian and under the UTMA. 

The custodian’s management role ends when the minor achieves age 25 or 18, depending on the specifics of state law. In your living trust or will, if you intend to leave a gift with the UTMA, you’ll identify the property and the minor that it is being left to. It is then your responsibility to appoint an adult custodian for supervising this property until the child reaches the age that he or she must receive it.

In the event that your first choice for custodian is unable to do the job, you can also name a successor custodian. Bear in mind that the selection of custodian is important because this individual has tremendous discretion to use and control the property in the child’s interests. The custodian has the right without court approval to manage, invest, re-invest, collect and hold this property, and to spend as much of it as the custodian deems advisable for the use and benefit of the minor.

A custodian is not responsible for filing a separate income tax return and is entitled to reasonable compensation paid to him or her from the management of the gift property. The custodian is not required to be under the thumb of court supervision. Every gift made under the UTMA can be made to only one minor with only one individual named as custodian. When the child who reaches the termination age, he or she will receive the remaining balance of the gift. Make sure that you sit down with your estate planning lawyer to discuss the termination age in your state and other specifics of making a gift through the UTMA.

 



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