In the US, a Uniform Act is an act proposed by the Uniform Law Commission to standardize state laws in the United States. Since Congress lacks the authority under the Constitution to legislate many issues, and the power is left to state governments, there is a need to have some consistency within laws across the states.
In most states, minors do not have the right to enter into a contractual agreement, and would not be able to own stocks, bonds, mutual funds, annuities or life insurance policies. In particular, that meant parents were not able to transfer assets to their minor children, but instead must transfer the assets to a trust.
In addition, the IRS allows persons to give up to $13,000 annually to another person without any tax burden. If this recipient person is a minor, the Uniform Gift Act to Minors allows the minor to own the assets without establishing a special trust fund. In essence, a custodial account is established, which functions much like a trust, but is less expensive and less complicated to set up.
Additional legislation, The Uniform Transfer to Minors Act (UTMA), also allows minors to own other types of property, such as real estate, fine art and royalties, and for the transfers to occur through inheritance. It basically extended the definition of gifts beyond cash and securities to include real estate, paintings, royalties, and patents.
The Uniform Gift to Minors Act prohibits the minor from taking control of the gifted assets until age 18, 21, or 25 depending on the state. In Colorado, the age is 21.
A gift transferred to an UTMA account is considered irrevocable, meaning it cannot be taken back. A custodian cannot use UTMA assets for the benefit of anyone other than the minor for whom the account was created. While the funds do not need to remain in the original UTMA account, the custodian must keep these assets separate from all other property and keep records of all transactions related to the assets. A custodian of an account is entitled to be paid for their services.
So which is better, a custodial account or an actual trust? It depends, often custodial accounts are better for transferring small sums, while trusts can handle larger transfers. An estate planning attorney can advise you of the various gifting and tax reduction options available to suit your particular needs.
I am trying to open a minor's trust account that cannot be checked out until minor is 18. Meaning parent cannot have access to monies. And it must earn interest.
Hello Susan, would you be able to call our office so we can talk through this with you? 719-520-1474 or 303-736-6060. https://coloradoestateplan.com/contact-us/
I have found an issuance instructions for a gift to a minor that my father took out for my son at birth in 1965, my father passed in2005, and my husbands name is listed as custodian, he has also passed, in 1990. How can I find out if there is value to this. Thank you in advance. My husbands name was Bruce Ashcroft
Hello Ms. Ashcroft, are you able to find the attorney who prepared the documents for more insight into the assets your father had? Do you know who was the executor? We would need more information to be able to fully assist you. Please call our office at 719-520-1474 to see if a phone consultation with one of our attorneys could assist with finding a solution.
Hello, Thanks for the reply. I have the document, it was not done by an attorney, it is more of a form, hand written fill in the blanks, so to speak. My brother was he executor of my fathers will, at the time of fathers passing. Perhaps I could make a copy and fax it to you if that would help. Please let me know. Thanks n advance. Brenda Ashcroft