UGMA (Florida). does the act specify if the funds int he UGMA can be used to contribute to an

1 ANSWERS

1. Ali Abdullah
   

   Hi There, In most states, minors do not have the right to contract, and so cannot own stocks, bonds, mutual funds, annuities and life insurance policies. In particular, parents cannot simply transfer assets to their minor children, but instead must transfer the assets to a trust. The most common trust for a minor is known as a custodial account (an UGMA or UTMA account). The Uniform Gift to Minors Act (UMGA) established a simple way for a minor to own securities without requiring the services of an attorney to prepare trust documents or the court appointment of a trustee. The terms of this trust are established by a state statute instead of a trust document. The Uniform Transfer to Minors Act (UTMA) is similar, but also allows minors to own other types of property, such as real estate, fine art, patents and royalties, and for the transfers to occur through inheritance. UTMA is slightly more flexible than UGMA. To establish a custodial account, the donor must appoint a custodian (trustee) and provide the name and social security number of the minor. The donor irrevocably gifts the money to the trust. The money then belongs to the minor but is controlled by the custodian until the minor reaches the age of trust termination. (The age of trust termination is 18 to 21, depending on the state and whether it is an UGMA or an UTMA. Most UGMAs end at 18 and most UTMAs at 21, but it does depend on the state.) The custodian has the fiduciary responsibility to manage the money in a prudent fashion for the benefit of the minor. Custodial accounts are most often established at banks and brokerages. Any money in custodial accounts for which you are the custodian will be counted as part of your taxable estate if you are the legal guardian of the child and the child has not yet reached the age of trust termination. It is important to title the account correctly. An "In Trust For" account, also known as a Totten Trust or guardian account, is not an UGMA/UTMA account. It is a revocable transfer that passes to the beneficiary without probate upon the death of the donor. (Totten Trusts are assets of the account owner, not the beneficiary, for financial aid purposes.) The proper way of titling a custodial account is "[Custodian's Name] as custodian for [Minor's Name] under the [Name of Minor's State of Residence] Uniform Gift to Minors Act". Substitute the word "Transfer" for the word "Gift" if you intend to establish an UTMA account instead of an UGMA account. Note that this method of titling is only correct for the US. In Canada, for example, one would title the account "[Custodian's Name] as trustee for [Minor's Name], a minor". Thanks

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