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The Uniform Transfers to Minors Act (UTMA) in Florida

The Uniform Florida Transfers to Minors Act (FTMA)

There’s an old joke about complex laws being enacted to make sure lawyers have enough work to do.  And, while it’s doubtful that any lawmakers actually draft legislation just to keep lawyers busy, it is true that, in general, legal complexity is good for business if you’re a lawyer.

FLORIDA’S UTMA: 

AN ALTERNATIVE TO TRUSTS … SOMETIMES

There are some laws, though, like the Uniform Transfer to Minors Act (“UTMA”), designed to keep things simple.  That simplicity can be a plus, but it also comes with some drawbacks.

Overview of The Florida Uniform Transfers to Minors Act

UTMA is a model law proposed by the National Conference of Commissions on Uniform State Laws intended to simplify custodial transfers of assets to minors and promote jurisdictional consistency among the states.  UTMA accounts provide some of the technical advantages of traditional trusts, but with less expense and complexity.

Florida’s version of UTMA, adopted with a few tweaks at Florida Stat. §710.101, et. seq., can apply if either the person transferring property (the “transferor”), the minor, or the custodian is a Florida resident when the transfer occurs – or if the property held in the account is situated in Florida.

The concept is fairly straightforward.  Rather than creating a revocable or irrevocable trust in Florida, the transferor transfers assets to an account controlled by a designated custodian (who can also be the transferor) for the benefit of a minor.  The custodian is typically the minor’s parent or other adult relative, but a familial relationship is not necessary.  When property is transferred to the account, it legally belongs to the minor, and the custodian manages, invests, and distributes it as the minor’s fiduciary.

Just about any type of asset titled in Florida (or assets situated elsewhere if a Florida resident) can be transferred to an UTMA account – cash, stocks, bonds, and mutual funds, life insurance, intellectual property, and title to real and personal property are all eligible.  Transfers, which are irrevocable, can be made by gift, by will, or through a trust.  A decedent’s personal representative can also designate a custodian and transfer property from an estate to a UTMA account, but judicial approval is required if the value is over $15,000.

When the minor reaches legal age, the account terminates, and he or she receives the property.  What constitutes “legal age” varies according to how the property was transferred.  If the transfer was made as a gift or by a Florida last will or trust expressly creating an UTMA account, the account terminates when the minor reaches age 21.  If the transfer arises from a will or trust not expressly creating an UTMA account, or from the estate of a decedent who did not have a will, the account terminates at age 18.

Florida is among a few states that allow UTMA accounts to remain intact until the minor reaches age 25, but only if the transferor clearly expresses an intent for the account to continue for the longer period.  Importantly, when the minor turns 21, the conservator must provide the (now former) minor with notice of his or her right to withdraw assets and close the account, and then the minor has a 30-day window to claim the property.

Advantages of Florida UTMA Accounts

The primary advantages of UTMA accounts are simplicity and low cost.  As with a trust, you can dedicate assets for the benefit of a minor without actually handing over control to the minor.  But, with an UTMA account, you avoid the expense and more complex formalities of creating and administering a trust.

Setting up an UTMA account is fairly easy.  You just need to make sure the assets are titled using the magic words prescribed by the legislature.  For financial accounts, this means opening an account in the name of an adult custodian “as custodian for [the minor] under the Florida Uniform Transfers to Minors Act.”  Or if the asset is Florida real estate or a life insurance policy, you use the statutory language on the deed or policy.  For personal property assets not subject to a title not subject to a title (e.g., valuable jewelry or antiques), the legislature provides a form document titled “Transfer Under the Florida Uniform Transfers to Minors Act.”  The signatures of the transferor and custodian and a description of the transferred property are all you need on the form to accomplish the transfer.

Taxation of UTMA Accounts

From a tax perspective, UTMA accounts have their pros and cons.  Earnings on assets held in the account are subject to tax, unlike a 529 Education Savings Account (ESA), for instance.  But the first $1,050 in earnings is tax-free, and the second $1,050 will be taxed at the minor’s rate, which is usually lower.  After that, earnings are taxed to the transferor.

Transfers to UTMA accounts are taxable gifts but can also be excluded under the $15,000 annual gift exclusion.  Because transfers are irrevocable, assets in an UTMA account are generally removed from the transferor’s taxable estate.  However, if the transferor also acts as the conservator and dies before the minor takes control of the assets, the account value will be included within the taxable estate.

For the minor beneficiary, an UTMA account qualifies as a “student asset” when applying for financial aid.  Because student assets are not subject to the larger asset allowance of parental assets, a UTMA transfer can potentially have a negative effect on financial aid eligibility.  Of course, property held in trust for a minor usually counts as a student asset as well.

When a Trust Might be a Better Option

Because UTMA accounts are simple by design, they are also limited in what they can accomplish compared to trusts.  At the very latest, an UTMA account terminates on the beneficiary’s 25th birthday (assuming the beneficiary cooperates and doesn’t close the account at 21).  After the account terminates, the beneficiary receives the assets with essentially no strings attached.  Trusts, though, can endure more or less indefinitely.  So, if you’re goal is to provide dynasty trust protection in Florida by preventing assets from being taken until well into the beneficiary’s adult life – or if you want to preserve property for more than one generation in Florida – an UTMA account will be inadequate.

Trusts also allow grantors much greater control over assets.  The only real restriction on a conservator’s use of UTMA property is that it must be used for the minor’s benefit, giving the conservator a great deal of leeway.  A trust, on the other hand, can be precisely tailored to the grantor’s objectives. If you want to set the amount and frequency of distributions, or define specific purposes for which assets can be used, you will need a trust.

Trusts are generally the superior choice for Florida asset protection, too.  Assets in an UTMA account are shielded from the transferor’s or conservator’s creditors.  However, the assets legally belong to the beneficiary and, therefore, can be attached by his or her creditors.  This is less of a concern while the beneficiary is truly a minor and unlikely to have creditors in a position to attach assets. But whether assets remain in the UTMA account till age 25 or the minor takes possession earlier, creditor attachment is possible once the beneficiary reaches adulthood.

Another limitation of UTMA accounts is that they can only have one beneficiary. If you have more than one minor in mind, it’s simple enough to establish multiple accounts for easily divisible assets like cash.  For assets that are more difficult to partition, such as real estate, you will probably need a trust if you want to earmark property to benefit more than one minor.

The Take-Away:

Florida’s UTMA law provides a fairly simple, inexpensive way to transfer assets to minors.  The downside of that simplicity is that UTMA accounts do not offer the flexibility, control, or asset protection of a traditional trust.  An experienced Florida estate planning attorney can help you decide which is the better option, taking into consideration your and the minor’s situation and goals and the nature of the property to be transferred.

Steve Gibbs, Esq.

26 comments… add one
  • Juan Carlos Pinilla January 8, 2020, 4:42 pm

    I have 2 questions:
    Can I transfer the assets of a UTMA account that was opened with limit age 21 to an UTMA account under the same name with limit age 25 and does it have any tax consequences?
    Can I transfer the assets of an UTMA account to a trust with beneficiary same person with no tax consequences?
    Best regards
    JC

    • gibbslawfl January 13, 2020, 2:06 pm

      Hello Juan, thanks for commenting. Your question would require some additional investigation and should be discussed confidentially in an attorney client relationship.

      Best,

      Steve Gibbs, Esq.

  • Karen Vandewater March 17, 2020, 3:03 pm

    Help please. My grandmother set up an account for my daughter but didn’t designate a successor custodian. Grandmother passed in 2009. There isn’t a lot of money in the account so we decided to just wait for daughter to reach the age of 21 (she is 19 now). We were told today that the account is about to be turned over to the state and that even she she turns 21 a custodian would have to sign off for her to obtain the funds. In order to prevent that we must “petition the court” to designate a custodian. The next issue is that the trustee for my grandmother’s estate was my father who is also now deceased. Where do we go from here?

    • gibbslawfl March 20, 2020, 2:44 pm

      Hello Karen, sorry to hear about your situation. Unfortunately we don’t handle petitioning for custodianships. You’ll need to locate a professional who handles guardianship petitions in FL.

      Best of luck.

      Steve Gibbs, Esq.

      • Jane Doe November 11, 2021, 2:50 am

        Greetings,

        My father was a professional national sports player and setup a Money Market account for me some rime between the age of 1 and 3.

        It held somewhere in the park of $10,000 to $30,000.

        My mother spent most if not all ofthe funds when I was 4 years old going on a luxurious two week trip to Jamaica, which included herself and her friends and really anyone else who wanted something purchased or to tag along.

        My father just informed me of the account where I am the recipient and my mother is the custodian.

        My father said he thought what she had done was legal.

        I am 24 years old in the state of Florida.

        What are my options?
        What type of lawyer would I contact?

        • gibbslawfl November 16, 2021, 4:38 pm

          Hello and thanks for commenting. This isn’t my area of expertise; however, my best recommendation is to connect with a civil litigation attorney who handles civil theft.

          Best, Steve Gibbs, Esq.

  • Kelly B March 29, 2020, 10:19 pm

    My daughter was ordered a sum of money from the court for an injury when she was 10. It is in a custodial account in Florida. When can she legally go to the bank and get this money out on her own without mom’s permission?

    • gibbslawfl March 30, 2020, 1:50 pm

      Hello Kelly, without seeing the account I believe that would be her age of legal majority (adulthood) which is 18. You may want to look at the court order for more information or to verify that.

      Best, Steve Gibbs, Esq.

    • Eve July 29, 2020, 1:26 am

      Hello,
      My child was the next of kin to inherit her father’s estate who died without a will. The courts in NC told me, the mother that they dont prefer a parent as the guardian of the estate and asked me to choose an attorney. Since nobody was willing to do it, they chose one for me who has grossly mismanaged the estate. As a new Florida resident, I’m looking for advice on the laws here specifically if the courts prefer the parent as the guardian of the estate of the child or if they often assign another person. I spoke with one attorney who told me it is unheard of that the courts in FL would not choose the parent as guardian of their child’s estate. Thank you in advance for your advice.
      Sincerely,
      Eve

      • gibbslawfl August 1, 2020, 12:01 pm

        Hello Eve, thanks for reading and commenting. Unfortunately, guardianship issue are not a focus for me and I only deal with them as part of an estate planning approach. I tend to prefer trust planning to falling back on the UTMA accounts. I would go with the advice of someone who regularly deals with FL guardianships related to minors.

        Best, Steve Gibbs, Esq.

  • Kelsey July 22, 2020, 2:05 am

    Hi I had got left money fro. My nana and I think my mom transferred it to her account is that even possible if I havent signed anything

    • gibbslawfl July 27, 2020, 2:05 pm

      Hello Kelsey, thanks for commenting. If your mom is the custodian on your account, perhaps she could’ve transferred it though it wouldn’t be right to do so because it is legally your account. It is tough to comment further without looking at it directly in the context of a confidential discussion.

      Best,

  • Mike c August 8, 2020, 4:33 am

    My daughter is the beneficiary of a live insurance policy of her uncle, she is 14. Can we just create the UTMA account to obtain the proceeds for her? The policy is $15,000.00

    • gibbslawfl August 8, 2020, 3:46 pm

      Hello Mike, you’ll need to do the UTMA and I believe a non-parent is usually appointed to manage it for the child’s behalf. Guardianships aren’t really my expertise so you should contact someone reputable who does this for minors regularly.

      Best, Steve Gibbs, Esq.

  • james phillips August 20, 2020, 12:24 pm

    My granddaughter lives in Florida and I live in Virginia. I have a UGTM set up for her with Fidelity but would like to transfer it to my daughter as custodian. I have arranged for Fidelity to send me a check for the account balance fbo my granddaughter. Can I just endorse the check and forward to my daughter and have her set up the account in Florida with her as the custodian? If not what is the best way to make the transfer? Thanks for your help!

    • gibbslawfl August 21, 2020, 2:28 pm

      Hello James, this is a question that I can’t answer without some in depth discussion because it may be much better for you to do a trust for your granddaughter rather than use a custodian approach. If you’d like to schedule a more in depth discussion, connect with Gene at info@gibbslawfl.com.

      Best, Steve

  • Neil Bernstein October 7, 2020, 5:44 pm

    The change in Florida for the UTMA from 21 to a possible 25; is this doable for an old UTMA (before July 1, 2015) or is it just for new accounts opened after July 1, 2015?

    • gibbslawfl October 7, 2020, 6:12 pm

      Hello Neil and thanks for commenting. I’m not aware of laws around updating an old UTMA to 25 because we don’t regularly represent legal guardians handling these accounts. I suggest connecting with a guardianship attorney who has experience in updating these accounts.

      Best, Steve Gibbs, Esq.

  • Kathy G February 19, 2021, 11:46 pm

    I have two questions.
    I believe I understand that the earnings in an UTMA account are taxed, but I’m not clear as to when that is. Are they taxed as the account sits untouched (as in money is only deposited to it), or when money is withdrawn?
    And finally, at some point can the money from the UTMA be moved to a Roth IRA or other type of IRA once the child has taxable income or becomes an adult? What are the tax implications?
    Thank you!

    • gibbslawfl February 22, 2021, 12:29 pm

      Hello Kathy, unfortunately, responding to specific taxation questions is beyond what I can do in a blog comment setting. You really need to get advice from a tax expert who handles UTMA accounts in a consultation setting.

      Best, Steve Gibbs, Esq.

  • Olly March 30, 2021, 8:06 pm

    Hey, I don’t believe I had an account but my grandparents purchased a house in my name with my grandpa supposing to be the co-owner and my mom my custodian till I was 18. I’m am 28 now. Going through some legal issues and they’re alleging my late mother was custodian of my grandpa and took out a loan they’re wanting me to pay or the house goes into foreclosure. Besides having proof that the deed was done incorrectly, the mortgage attorney didn’t do his due process to see my mother never went to court to be a custodian and my late grandpa was alive when the loan was taken out on the house, which no one knew about. My sister sent me this and highlighted where you said once someone Is 18, it is terminated. Is this true for all custodians or only if I had this account you mention? Was going to run this by my lawyer.

    • gibbslawfl April 6, 2021, 3:38 pm

      Hello, it sounds like you need a consultation to review the documents relative to your specific situation. Unfortunately, guardianships and UTMA accounts aren’t a major focus for us. I suggest locating someone who regularly practices guardianship law.

      Best, Steve Gibbs, Esq.

  • Kim June 6, 2021, 5:29 pm

    Does this apply to a bank account opened for a child by a father who deposited family money gifts into the account?

    • gibbslawfl June 7, 2021, 2:05 pm

      Hi Kim, it certainly could apply; however, I’m not certain. More facts should be investigated on the context of a confidential legal consultation.

      Best, Steve Gibbs, Esq.

  • Peter C Melley July 17, 2021, 9:51 am

    Steve Gibbs, Esq.
    Hello. I have 4 sons ages 18, 17, 16 & 14. I believe 2-3 are interested in FSU. We live in Orlando, Fl. They all have Vanguard UTMA accounts. We are investigating a purchase of a condo near the campus. Financially even if only 2 attend there will be a financial savings. I believe it will be possible to lend financial assistance if they control housing cost this way.
    I need advice on how to structure the purchase and proper ownership of the deed. To date I have not found anyone who understands what needs to happen with regards to deed configuration.

    I read in your write-up you referred to “judicial approval”. I require a detail or what and how this can be obtained. Each UTMA will contribute at least $30,000 for the down payment taken from the UTMA. Mom and I intend to pay for flooring and furniture and food/electric/comcast.
    Regards,
    Peter

    • gibbslawfl July 19, 2021, 10:44 am

      Hello Peter and thanks for connecting. I recommend that you schedule a consultation; either, directly on our home page at gibbslawfl.com or by reaching out to Gene at info@gibbslawFL.com or calling 239-415-7495. Note, I generally suggest that people go with proper trust planning as opposed to relying on UTMA accounts.

      Best, Steve Gibbs, Esq.

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