Uniform Transfers to Minors Act (UTMA)

The Uniform Transfers to Minors Act (UTMA) is a law that allows adults to make gifts of Money or property to minors without the need for a formal Trust. Under UTMA, Assets transferred to a minor are managed by a custodian until the minor reaches a specified age, typically 18 or 21, depending on state law. The custodian has a fiduciary duty to manage the Assets in the best interest of the minor, using the funds for the minor’s benefit, such as education or other expenses.

Examples

• John, an uncle, gifts $10,000 to his 10-year-old niece through UTMA. The funds are held by a custodian until she turns 21, at which point she can access the full amount.
• Mary sets up a UTMA account for her son, depositing Stocks that appreciate over time. The custodian manages the Stocks and any income generated until the son reaches the legal age.

Cases

In In re Estate of Donnelly, the court ruled that the custodian must act in the best interests of the minor and cannot use the funds for personal expenses. This case highlighted the fiduciary responsibility of custodians under UTMA.

In State v. DeWitt, the court addressed disputes over whether the custodian could use funds for the minor’s educational expenses, ultimately determining that such use was permissible under UTMA provisions.