Uniform Acts Uniform Gift to Minors Act Law and Legal Definition
The Uniform Gift to Minors Act (UGMA) is a law adopted by most states allowing an adult to contribute to a custodial account in a minor's name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. The custodian has a fiduciary duty to manage the account prudently, but once the minor reaches the age of majority, he/she has complete rights to the funds in the account. The assets are the legal property of the minor, and the parent has no legal control over the uses of the proceeds of the account. All withdrawals from the account are taxed at the minor's rate. Putting money into a UGMA account can negatively impact the chances for financial aid, since financial aid officers weigh children's assets much more heavily than parents' assets.
If the custodian of the account dies, a new custodian must be named. The new custodian is appointed under the provisions of the applicable state UTMA or UGMA listed on the account. Typically, under the applicable UTMA/UGMA statute, the custodian may name a successor upon death. If a successor is not designated and the minor is over age 14, the minor may appoint a successor using a notarized letter. Otherwise, the minor's guardian becomes custodian or the court appoints one. State UGMA or UTMA laws vary, so local law should be consulted for specific requirements.
The following is an excerpt from a state law governing UGMA accounts:
"1. Custodial property is created and a transfer is made whenever:
- An uncertificated security or a certificated security in registered form is either:
- Money is paid or delivered to a broker or financial institution for credit to an account in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act";
- The ownership of a life or endowment insurance policy or annuity contract is either:
- An irrevocable exercise of a power of appointment or an irrevocable present right to future payment under a contract is the subject of a written notification delivered to the payor, issuer, or other obligor that the right is transferred to the transferor, an adult other than the transferor, or a trust company, whose name in the notification is followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act";
- An interest in real property is recorded in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act";
- An interest in any property not described in paragraphs "a" through "e" is transferred to an adult other than the transferor or to a trust company by a written instrument in substantially the form set forth in subsection 2. An interest in any property as used in this paragraph does not include a certificate of title issued by a department or agency of a state or of the United States which evidences title to tangible personal property."
(1) Registered in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act"; or
(2) Delivered if in certificated form, or any document necessary for the transfer of an uncertificated security is delivered, together with any necessary endorsement to an adult other than the transferor or to a trust company as custodian, accompanied by an instrument in substantially the form set forth in subsection 2;
(1) Registered with the issuer in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act"; or
(2) Assigned in writing delivered to an adult other than the transferor or to a trust company whose name in the assignment is followed in substance by the words: "as custodian for . . . . . . . . (name of minor) under the Iowa Uniform Transfers to Minors Act";
Legal Definition list
- Uniform Acts Uniform Custodial Trust Act
- Uniform Acts Uniform Commercial Code
- Uniform Act on Intestacy, Wills, and Donative Transfers
- Uniform Act on Interstate Compromise of Death Taxes
- Uniform Act on Interstate Arbitration of Death Taxes
- Uniform Acts Uniform Gift to Minors Act
- Uniform Acts Uniform Interstate Family Support Forms
- Uniform Acts Uniform Transfers to Minors Act
- Uniform Adoption Act
- Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act
- Uniform Alcoholism and Intoxication Treatment Act
