Uniform Transfers to Minors Act (UTMA) (trust-like alternative)

Question 1

Three reasons to make a gift to a minor under UTMA —

Answer 1

1- avoids a guardianship proceeding
2- avoids a trust & the court supervision that comes along with trusts
3- qualifies for the $14,000/donee annual exclusion from federal and state gift tax

Question 2

How do you make a UTMA gift?

Answer 2

• must be made to a custodian
• must specify that it is made under NY UTMA
• can be made in a will so long as the same required statutory language is used

Question 3

Duties of a UTMA Custodian

Answer 3

• Hold, manage and invest the property under a prudent person standard
• pay over to the minor or the for the minor’s needs what part of the property that the custodian deems advisable; AND
• pay what is left of the property to the minor when the minor turns 21 (post 1/1/97) or 18 (pre 1/1/97)

Question 4

Difference from a trust

Answer 4

UTMA does not create a trust; it is a special statutory conservatorship, where the custodian does NOT hold legal title (unlike a trustee who does).

Question 5

UMTA Tax Consequences

Answer 5

• If donor names himself or herself as custodian then the amount of the gift is includible in the custodian’s gross estate for federal and state estate taxes.
• If donor names someone else as custodian, then the amount of the gift is not includible