The Uniform Transfer to Minors Act (UTMA) provides a method through which property can be transferred to a minor, who would otherwise be unable to receive and hold property due to his/her age.
Nomination of Custodian
The Uniform Transfer to Minors Act allows individuals to transfer most types of property to a custodian who is charged with holding the property for the benefit of the child. The appointment of a custodian can occur through a will, trust, a deed, or other instrument exercising power of appointment. A person can make a gift under the Act by registering an asset or placing funds in the donor’s name, name of another adult acting as custodian, or in the name of bank and/or company acting as custodian in conformance with the requirements of the Act. The person transferring the property to a custodian to hold for the benefit of a minor may appoint substitute custodians in the event the named custodian dies before the transfer or is otherwise unable or unwilling to serve. The appointed adult acts as custodian of the property or asset, but the child is deemed to hold legal title to property transferred under the Act.
Gifting Children Property Under the Uniform Transfers to Minors Act
The UTMA operates fairly simply. The UTMA sets a time limit for when the account established for the child needs to be collected. Under Arkansas law, the set time limit is 18-21 years old. This means a UTMA account established in Arkansas must end prior to the minor reaching age 18-21. The individual leaving property to the minor has the right to choose any age within the 18-21 range when the minor may receive the property. When the minor reaches the designated age within the 18-21 range, the custodial relationship ends, and the former minor owns the property outright.
The custodian has the right to collect, hold, manage, invest, and reinvest the minor’s property. The custodian is constrained by certain limitations in the UTMA, namely the custodian must act prudently and honestly. The custodian, however, does not need court approval to take action with regard to the minor’s money. The money can be used for the benefit of the minor for things such as education or anything else related to the child. The custodian is entitled to compensation for reasonable expenses from the custodial property. Moreover, when the child becomes an adult and gains unrestricted access to the funds, he/she can spend the money or use the asset without limitation.
Contact the Law Offices of Dustin A. Duke, PLLC
Contact the Law Offices of Dustin A. Duke, PLLC if you need help transferring property to a minor or with other estate planning needs. Call (501) 960-6060 to reach us by phone or click here.