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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.



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.

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