UTMA/UGMA

Who can give securities to a minor: [Donor]

1. Must be an adult 2. May give any kind of securities or cash, including mutual fund shares. When gifting securities, only fully paid securities may be gifted. 3. Any amount may be given. There is no limit on the size of a gift. 4. Appoints the custodian for the account. The donor is permitted to designate himself as custodian.

Donor should consider:

1. completion of transaction occurs when securities are registered in the name of the custodian for the benefit of the minor. 2. the age of the person to whom the gift is made 3. that a gift is completely irrevocable 4.That certain state permit gifts of money, life insurance policies & annuity contracts.

2. In a Custodian account, the account is opened with the minor's social security number, not the donor's or the custodian's. 3. Only new gifts are permitted. Property already owned by the minor may not be given.

4. Stock certificates must be registered in the name of the custodian, not as trustee or guardian, but as custodian. * registration of the securities completes the gift 5. Securities may not be purchased on margin & short sales are not allowed in UGMA accounts

The Custodian: 1. Must turn over all custodial property to minor when the minor reaches the age of majority. * Legal title is vested in the minor & cannot be revoked 2. Must manage the account for the best interest of the minor [which would include purchase & sales of securities as well as the exercising of subscription rights] 3. Is empowered to collect, hold, manage, invest, & reinvest custodial property as he/she deems advisable. 4. May, at his or her discretion, use custodial property for support, maintenance, education, & general use & benefit of the minor. 5. Is usually permitted to receive compensation for reasonable services [unless he is the donor] & reimbursement for necessary expenses

6. Custodian retains control over the minor's account until either: a. minor attains age of minority in which case & securities remaining will be distributed to the individual b. The custodian is removed by a court order, or c. custodian dies. If custodian dies, a successor will be appointed. d. if the minor dies, the remaining proceeds will be payable to the minor's estate. 7. If the custodian is someone other than a child's legal guardians, the guardians cannot exert any control or enter orders in the account. 8. Checks can never be drawn on the account in the custodian's own name 9. Transactions may be only executed by the custodian. Note: if a stock certificate is signed by the minor, the certificate is not in negotiable form.

6. Cash proceeds from sales or dividends may be held in a custodian account if they are to be reinvested. 7. The transfer agent is given the minor's SSN, not the donor's or the custodian's SSN

8. The unearned income over $1,900 for 2011 & 2012 for a child under 18 will be taxed to the child at the rate at which it would be taxed if it were added to the parents' top marginal rate, if that rate is higher than the child's rate.

UGMA - Uniform Gifts to Minors Act

Also known as the Uniform Transfer to Minors Act [UTMA]

UGMA or UTMA created the ability to have an account that allows a minor to own securities.

Commonly used to give monies to a minor without involving an attorney to establish a special trust Any account that includes an adult & a minor must be set up as a UGMA/UTMA, not as a joint account.

Donor cannot make a gift through his last will & testament [would be considered inheritance]

The donor does not pay capital gains taxes on donated securities. The minor becomes responsible for any tax consequence.

The Custodian Account: 1. For each UGMA account there may only be

a. 1 person as custodian - joint custodians are not permitted b. 1 minor as beneficiary - multiple beneficiaries are not permitted on the same account