As a parent, you naturally want to do everything in your power to ensure that your children are provided for both today and in the future. To that end, you may have taken steps to execute an estate plan that not only appoints guardians, but also identifies your assets and dictates how they are to be divided among your issue in the event of your untimely death.
Parents who make this wise decision are more than likely aware that their children are in no position to manage these assets — especially money — by virtue of their age and their maturity level. Indeed, the law recognizes this and dictates that until a child reaches the age of 18, he or she cannot inherit property in their own name, and that an adult must be appointed to manage the inherited property until such time as they reach the age of majority.
While some parents might manage this reality by creating a trust, which would name a person or institution to manage the money left to the children — i.e., the beneficiaries — in accordance with the terms outlined in accompanying documents, others may elect to go a different route by leaving the money to their children under what is known as the Uniform Transfers to Minors Act.
What exactly is the Uniform Transfers to Minors Act?
The Uniform Transfers to Minors Act — or UTMA — is a law on the books in every state that permits adults to appoint a “custodian” in a will or trust to manage money for their children up to varying age limits. The money, in turn, is held in a UTMA account, which can be opened at any bank or brokerage company.
To illustrate, Parent A could draft a provision in their will declaring, “I leave a gift of $50,000 to Trusted Individual, as custodian for my Daughter A, under the California Uniform Transfers to Minors Act up until the age of 18.”
What is the age limit under the California UTMA?
The California UTMA’s age limit is between 18-25 years old, meaning the custodianship over a UTMA cannot end anytime before the age of 18 and anytime after the age of 25.
By way of example, Parent A could dictate that Trusted Individual’s custodianship over the UTMA account for Daughter A ends at age 19 or 23, but not at age 17 or age 27.
We’ll continue this discussion in our next post. In the meantime, if you have questions or concerns relating to UTMA accounts or estate planning in general, consider speaking with a skilled legal professional.