Uniform Gifts/Transfers to Minors Act UGMA UTMA

Donor should consider:

1. *completion of transaction* of securities occurs when: -*securities are registered in NAME OF CUSTODIAN* - for the *benefit of the minor* 2. age of the person 3. gift is *irrevocable* 4. certain states permit gifts of: -money -life insurance policies -annuity contracts 5. **cannot make gift through last will & testament (inheritance)** 6. **donor does NOT have to pay capital gains taxes on donated securities**

Custodian

1. *turn over all custodial property to minor at age of majority* 2. *legal title is invested in minor* and cannot be revoked. 3. must manage account for *best interest of minor* -(purchase & sale of securities and exercising of subscription rights) 4. collect, hold, manage, invest, re-invest custodial property 5. may use custodial property as: -support -maintenance -education -general use & benefit of minor 6. permitted to: -*receive compensation* for reasonable services, (unless custodian is the donor) -*receive reimbursement* for necessary expenses 7. not required to file a fiduciary tax return

Custodian Account for UGMA account limitations

1. Not allowed -*securities purchased on margin* -*Short sales* 2. *cash proceeds* from sales or dividends: -may be held if they are going to be *reinvested* 3. transfer agent is given *MINOR's SS number* 4. taxation is higher of: -*parent's top marginal rate* -*child's rate* ex: -unearned income OVER $1900 for 2011 and 2012 for a child UNDER 18 will be taxed to the child at a rate at which it would be taxed if it were added to the *PARENT'S top marginal rate, if the rate is HIGHER than the child's rate*

Custodian Account for UGMA account

1. ONE person as custodian 2. ONE minor as beneficiary 3. opened with *MINOR'S social security* 4. only *NEW gifts* permitted -*(property already owned by minor may not be given)* 5. *stock certificates* must be -*registered in the name of the custodian* as custodian -(not as trustee or guardian) 6. *registration of securities completes the gift* 7. cash, securities, life insurance, and annuities may generally be transferred into the acocunt 8. *custodial property* may be used for the benefit of the minor

Uniform Gifts to Minor's Act/ Uniform Transfer to Minors Act UGMA/UTMA

1. created ability to have an account that: -*allows minor to own securities* 2. used to give cash to a minor 3. *without involving attorney* to establish a special trust 4. *minor becomes responsible for taxes* -*any account that includes an adult and a minor must be set up as a UGMA account, not a joint account*

Custodian orders

1. if custodian is not the guardian: -*guardian cannot exert control or orders in account* -ex: if uncle is custodian for nephew, parents do not have any say 2. *checks*: -*never drawn in custodian's own name* 3. transaction can only be *executed by the custodian*

Custodian retains control until:

1. minor attains majority: cash & securities distributed 2. custodian is removed by court order 3. custodian dies: successor is appointed 4. *If minor dies: proceeds payable to minor's estate*

Donor

1. must be an adult 2. give any kind of securities or cash, including mutual fund shares 3. *only fully paid securities may be gifted* 4. *no limit on size of gift* 5. *appoints custodian for account* 6. permitted to *designate themselves as custodian*