If you are planning on making gifts or transferring property to children, you should familiarize yourself with the UGMA and UTMA. These laws allow minors to receive property and have it held by a custodian until they get older.
Brief History of the UGMA and UTMA
The UGMA, or Uniform Gift to Minors Act, was a law allowing title to property to be passed to minors by using a custodian. The child would have legal ownership of the property at the time it was conveyed to him or her, but a custodian would hold onto the property until the minor reached an age of majority set by law. Until that age, the minor could not liquidate or use the property. The UGMA covered only securities, cash or other personal property.
The UTMA, or Uniform Transfers to Minors Act, updates the UGMA. It allows custodianship for any kind of property for benefit of a minor. Instead of just securities, cash, and personal property, any type of real or personal property can be conveyed to a minor in care of a custodian. The UTMA is part of California law, as well as the laws of several other states.
Impact of the UTMA on Your Estate Planning
If you are planning to give a gift or make a bequest to anyone under age 18, you may want to consider using a custodian. A custodian has the obligation by law to invest and manage the property until the minor attains the age of 18 or another age up to 25 if specified in the legal documents. In other words, the custodian acts like a trustee of the property until the minor gets older. The minor will not be able to use or sell the property until the custodianship ends.
Parents can take advantage of the UTMA if they want to give property to their young children but do not want to set up a trust. A bank or brokerage can set up an appropriate UTMA account. But since the children cannot touch the property until at least age 18, parents should make sure that there is money set aside for the children’s daily needs, separate from the custodianship. Further, parents should carefully choose a custodian and observe all legal formalities when placing the money in the custodian’s care so that the child has clear legal title to it.
If you have minor children or minor relatives and want to give property to them, consider using the UTMA for their benefit. Talk to a California estate planning lawyer for more information on how to take advantage of this law.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet’s website or call her office at (650) 469-8206.
