Gifts to Minors and 529 Accounts
Established in order to allow gifts to children from parents, grandparents and other guardians, the Uniform Gifts to Minors Act (UMGA) was the first act to allow investing in stocks, bonds and mutual funds. When originally established, the act provided for irrevocable gifts to children in order to allow easy transfer of assets that would be provided to the child when they reached the majority age in their state. This ranged from age 18 to age 21, depending on the state. New York age of majority at the time of establishing an UGMA account was 18 and when they adopted the Uniform Transfers to Minors Act (1996) the rules changed to require that the minor reach the age of 21 prior to having full access to the funds.
UTMA accounts should not be confused with 529 accounts. A 529 account is established soley for the purpose of education while an UTMA account may be used for any purpose. During the time when the beneficiary is a minor, the custodian is compelled to use the funds from an UTMA only for purposes to benefit the minor. After the minor has reached the age of majority, they are allowed to use the funds from an UTMA in any way they deem appropriate.
Surrendering Control to a Minor
The funds or assets in an UTMA or UGMA account are surrendered to a child when they reach the age of majority specified by the act in their state. In some instances, if the UGMA and UTMA ages are different, the child may be able to access one account but may not be able to access another account. Here are some examples:
Kentucky and Maine - When Kentucky and Maine adopted the Uniform Gifts to Minors Act, the age of majority in those states was 21. Subsequently, the age of majority was lowered to age 18. When the Uniform Transfers to Minors Act was adopted in 1986 in Kentucky, the age that the child was able to receive new funds was lowered to 18. In Maine, the new statutes were adopted in 1988;
California Exception - The State of California has an exception to the age of majority. Custodians may specify an age up to age 25 before the minor is allowed to remove funds from the account; otherwise they may withdraw funds at age 18;
New York - For residents of New York, the question what is the age of trust termination of an UTMA account in NY has a simple answer. When New York observed the UGMA rules, the minor as allowed access to funds at age 18. In July of 1996, New York adopted the UTMA rules which increased the age to age 21.
What this means:
Today, since most states no longer have UGMA accounts on the books. This is because most minor accounts were liquidated and provided to the minor. The last states to adopt the UTMA rules were Michigan and Rhode Island. Today, Vermont and South Carolina still use UGMA rules, they are the last two states. However, if the minor was 18 years of age and they still had funds in both an UTMA and UGMA account, they may not be able to secure the funds from both accounts.
Today, nearly all states have adopted UTMA versus UGMA. California, District of Columbia, Louisiana, Michigan, Nevada, South Dakota, Virginia, Kentucky, Maine and Oklahoma all allow the minor to secure the funds at age 18. California does have an exception that allows the custodian to specify an age of withdrawal up to age 25. The age of trust termination of an UTMA account in NY is age 21.
- Financial Dictionary: Uniform Gifts to Minors Act https://financial-dictionary.thefreedictionary.com/Uniform+Gifts+to+Minors+Act
- Financial Directory: Uniform Transfers to Minors Act https://financial-dictionary.thefreedictionary.com/Uniform+Transfers+to+Minors+Act
- The SmartStudent Guide to Financial Aid: Age of Majority and Trust Termination: https://www.finaid.org/savings/ageofmajority.phtml
- Author’s Personal Experience