Uniform Transfers to Minors Act

(redirected from Utma)
Also found in: Acronyms.

Uniform Transfers to Minors Act (UTMA)

A law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include real estate, paintings, royalties, and patents.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Uniform Transfers to Minors Act

An extension of the Uniform Gifts to Minors Act allowing assets other than cash or securities to be considered gifts. Specifically, this extension was intended to allow gifts of property to persons under 18 or 21 (depending on the jurisdiction). Both acts allow for the giving of gifts to children up to so much in value without any tax consequences. These gifts are held in a custodianship until the child reaches the age of majority. The custodian is appointed by the donor (and is often the donor himself/herself). The UTMA was set up to allow these transfers to occur without a lawyer needing to set up a trust, a process that can be complicated and sometimes expensive. The National Conference of Commissioners on Uniform State Laws drafted the UTMA in 1986, and a version of it has been passed in most U.S. states.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Uniform Transfers to Minors Act (UTMA).

The UTMA allows you as an adult to set up a custodial account for a minor, who owns any assets placed in the account. You may act as custodian of the account or name another adult to serve in that role.

The UTMA is similar to the Uniform Gifts to Minors Act (UGMA) in many respects, but you can use an UTMA to gift assets in addition to cash and securities, including real estate, fine art, antiques, patents, and royalties.

You may choose to transfer assets that you expect to increase in value into the UTMA account. That way, any capital gains occur in the account, and you avoid potential estate taxes that might have been due had you owned the asset at your death.

If you sell an asset in the account, taxable gain is figured at the beneficiary's capital gains tax rate provided he or she is 18 or older. Taxable capital gains above a certain limit that Congress sets each year are calculated at the parents' rate if the child is younger than 18.

One potential disadvantage of a custodial account is that any gift to the account is irrevocable. The assets become the property of the beneficiary from the moment they go into the account, even though as a minor he or she cannot legally control activity in the account or take money out.

At majority, which occurs typically at 18, 21, or 25 depending on the state, the beneficiary may use the assets as he or she wishes. To avoid owing potential gift tax, you may want to limit what you add each year to an amount that qualifies for the annual gift tax exclusion.

In addition, if you are both the donor and the custodian, and die while the beneficiary is still a minor, the assets are considered part of your estate. That could make your estate's value large enough to be vulnerable to estate taxes.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Any trust company or adult other than the insured can be nominated custodian (an adult under state UTMAs is usually age 21).
A gift to an UGMA or UTMA account (generally called a "custodial account") usually qualifies for the gift tax annual exclusion.
Product Strategy 4: Compare 529 Plans, UGMAs, and UTMAs to Save Taxes and Plan for College
Trustee can make distribution between state law age of majority and age 21 Factor UTMA Type of property Donor can make gifts of almost any type of property Dispositive Disposition must follow provisions statutory guideline Investment Custodian limited to powers investment powers specified by statute Time of Custodial assets must be distribution paid to beneficiary upon of assets reaching statutory age
The UTMA Model AL 805 saw grinder has a pre-mounted face and top grinding wheels that allow face and top grinding in one setup, the company adds.
Unlike the Uniform Gift to Minors Accounts (UGMA) and the Uniform Transfer to Minors Accounts (UTMA), where your child gains control of the money at the age of majority, 529 plans allow the donor to decide when money Mill be taken out and for what purpose.
[section] 710.102 by adding a definition for "qualified minor's trust" in sub-section (14); [subsection] 710.104 and 710.108 to expressly include benefit plans within the UTMA statutes; and [section] 710.116 to authorize a custodian under a UTMA account so transfer the minor's property to a qualified minors's trust.
Before discussing the mechanics of the trust arrangement, it should be noted that most transfers made for a minor's benefit are made directly to a minor's account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), depending on state law.
Custodial (UTMA and UGMA) accounts are not tax-deferred, and any income is taxed annually.
Under current financial aid formulas ESAs, UGMA, and UTMA accounts are student assets, assessed at 35 percent.
All states have adopted laws facilitating the making of gifts to minors.(362) In many states, these laws conform to the Uniform Gifts to Minors Act (hereinafter UGMA), the Uniform Gift of securities to Minors Act, or the Uniform Transfers to minors Act (hereinafter UTMA).(363) More the enactment of these acts, donors were often compelled to transfer property to the beneficiary's legal guardian.(364) "Guardianships, however, present their own set of problems.
UTMA's Board has given TCA formal notification of their intent to become the eleventh chapter.