Uniform Transfers to Minors Act (UTMA) FAQ
What in the world is an UTMA account?
It's an account created for a minor. UTMA stands for "Uniform Transfer to Minors Act." Some states have UGMAs ("Uniform Gifts to Minors Act") instead of UTMAs. The terms UTMA and UGMA are interchangeable.
How is an UTMA account established?
Typically you set it up with a financial institution.
Who are the parties involved?
In addition to you (the person making the gift to the UTMA account) there's the beneficiary and the custodian.
What does the custodian do?
The custodian holds the property in the UTMA account for the benefit of the beneficiary. He or she invests the property, and can pay property out of the account for the beneficiary's benefit.
What's the advantage of an UTMA account over a guardianship?
The biggest benefit of an UTMA account is that you don't need to go to court in order to distribute property from the account. That saves time and money (although the downside is little or no court supervision). Also,...
Is the property in an UTMA account ever required to be distributed to the beneficiary?
Yes -- when the beneficiary reaches age 21, he or she gets all of the property in the account. This is another advantage over a guardianship (where property is turned over to the beneficiary upon reaching age 18).
Are there alternatives to an UTMA account?
Yes. The best alternative is creating a gift trust for the minor. Trusts are very flexible vehicles, and you can have provisions holding the property in trust way past the minor's 21st birthday.
Where can I read more?
The relevant statute for Illinois UTMA accounts is here.
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