Custodian Accounts

Question 1

What are the basic rules of a UGMA account?

Answer 1

• ANY adult can open account for minor
• All securities must be registered in account name
• Cash balances can’t be held for extended time; must be invested in mutual fund or transferred to custodian account maintained by a bank
• One custodian for one minor
• No margin accounts; cash only
• Gifts are irrevocable
• SS# of MINOR is needed

Question 2

What must the custodian do if there is a rights offering for stock held by account?

Answer 2

Must be sold or exercised - can’t just let them expire

Question 3

What are the rules of a UTMA account?

Answer 3

Like a UGMA, but UTMA allows transfer of ANY type of gift like real estate, art, etc. The state also sets a transfer age, rather than it just transferring immediately at 18