Gift To Minors Act

By: Martin M. Shenkman, CPA, MBA, JD

State law provides that if you gift money or property to a minor (non-adult) the property can be held under the terms of that state law for the benefit of the minor Uniform Gift To Minors Act ("UGMA"). When such an arrangement is established an adult to be in charge of it is designated (called custodian). You can sometimes designate a successor custodian in case the first or primary custodian cannot serve. Not all types of property can be held under an UGMA. Some states have enacted a Uniform Transfers To Minors Act ("UTMA") that may permit other types of property to be held. Be cautious that if a parent is named custodian and dies the UGMA assets will be taxed in the parents estate. Depending on state law the minor may have the legal right to demand that you account for what has been done with the account from age 14 onward. At age 18, 21 (or perhaps another age if permitted under your state law) the minor obtains control over the assets. Compare using a trust, or 529 college savings plan.

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