The Uniform Transfers to Minors Act (UTMA) is a law that allows adults to transfer control of assets from themselves to a minor child. This is usually done to preserve and protect the child’s inheritance until they are of age. It is important to understand how the UTMA works so that you can make sure your assets are properly managed for your child’s benefit.
What UTMA Does
The Uniform Transfers to Minors Act provides a legal means to transfer custodial assets such as money, securities, and other personal belongings to minors. Some states have adopted the Uniform Gifts to Minors Act (UGMA), which is very similar to UTMA but is limited to gifts in the form of money, also known as “custodial accounts.”
When an adult transfers an asset to a minor under the UTMA, they are putting it under the control of a “custodian.” The custodian is the adult responsible for managing the minor’s assets and ensuring they are used for the benefit of the minor. The custodian can also be an organization such as a bank or other financial institution.
Benefits of UTMA
There are several advantages to transferring assets to a minor under UTMA. For example, the adult can designate a custodian to manage the minor’s assets until the child is old enough to make decisions for themselves. Another advantage is that UTMA assets are generally not subject to the Uniform Transfer on Death Act (UTDA), which means the minor can receive the assets without probate court proceedings.
It’s also important to note that UTMA assets may be protected from creditors or potential legal claims against the adult transferring the assets to the minor. Because the minor is the legal owner of the assets, the adult is no longer responsible for them.
Conclusion
The Uniform Transfers to Minors Act is a tool that can be used to preserve and protect assets for minors. It provides protection from creditors, legal proceedings, and taxes, and gives the adult transferring the assets greater certainty that they are protected.