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Montana Uniform Transfers to Minors Act (UTMA)Custodial Accounts for Children Under 21 years of age
Revised May 2012
MontGuide 199910
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Marsha A. Goetting Ph.D., CFP®, CFCS
Professor & Extension Family Economics Specialist
Department of Agricultural Economics & Economics
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Montana Uniform Transfers to Minors Act• Montana Code Annotated §72 – 26 – 501
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UTMA Custodial Account
•An alternative for a parent or other adult who wants to provide benefit of child under 21 years of age
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UTMA Custodial Account
• Make gifts of assets during life
• Bequests with a will
• Distributions from a trust
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Minor A person who has not reached the 21 years of age
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Transferor • Person who gifts
assets to a UTMA (custodial) account
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Custodian
• Manages property that has been irrevocably transferred to UTMA (custodial) account for benefit of child who is under 21 years of age
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What assets can be transferred to a UTMA (custodial) account?
• Money• Securities• Stocks & Bonds
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Types of Assets
• Certificates of Deposit
• Savings Accounts• Real Estate
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Types of Assets
• Designate minor as beneficiary:
Life insurance proceeds Pension or Profit Sharing
Plans
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Whom should I designate as custodian?
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Custodian • Transferor• Another adult• Trust company
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Custodian Rules
• No joint custodianships are allowed
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Alternate Custodian •Substitute•Successor
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Duties of Custodian 1. Manages,
registers or records title to UTMA custodial property
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Duties of Custodian 2. Collects, holds,
manages, invests, & reinvests custodial property
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Duties of Custodian 3. Observes the
standard of care that would be used by a• “prudent person”
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Duties of Custodian 4. Identify and keep
custodial property separate from other property
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Duties of Custodian 5. Not allowed to
pledge the account as collateral for any loans to him/herself
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Where can UTMA custodial accounts be established?
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Establish accounts
• Bank• Savings Bank• Credit Union• Mutual Fund Company• Brokerage Firm
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What is the wording used on a UTMA (custodial) account?
Montana Code Annotated§ 72 – 26 – 603
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Wording • “As custodian for (name of
minor) under the Montana Uniform Transfers to Minors Act”… Example p.2 of MontGuide Financial institution may
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What happens to custodial assets when child reaches 21 years of age?
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Custodian Responsibilities•Close UTMA accountTransfer assets to child
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What is the tax effect of a UTMA account?
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UTMA account
•Custodianship is not considered a separate taxpayer
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Taxable to child Unearned income• Interest from CD• Dividends from stock 29
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Kiddie Tax Under 14
Unearned income up to $1,900• First $950 taxed atkids’ zero bracket• Next $950 10% rate
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Kiddie TaxUnearned income more than $1,900• Taxed to child at parent’s bracket as long as child under age 14
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Child--age 14Tax based on child’s income tax bracket
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What if I need money I transferred to the UTMA (custodial) account?
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“Tuff” luckDecision is irrevocable
Funds can’t be taken back by transferor•Not even for college expenses
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What happens to assets in UTMA (custodial) account if a child passes away before reaching 21 years?
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Distributed by Montana Intestacy Statutes to child’s heirs
If not married & no children
Parents equally36
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Distributed by Montana lawIf parents are deceased• Brothers • Sisters
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Distributed by Montana lawIf any siblings are deceased, then to their descendants
Nieces Nephews
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POD and TOD Designations
Cannot be used on UTMA (custodial) accounts
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Court may remove Custodian
Not properly fulfilling custodial duties
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Eligibility for College Financial Aid
UTMA (custodial) accounts are counted as a student’s assets• Income reported on Social Security number of the child
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Other AlternativesSection 529 College Savings Plan
Coverdell Education Savings Account
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Montana Uniform Transfers to Minors Act (UTMA)Custodial Accounts for Children Under 21 years of age
Revised May 2012
MontGuide 199910
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