The Uniform Transfers to Minors Act (UTMA) is a 1986 law drafted by the National Conference of Commissioners on Uniform State Laws that has been adopted in every state in America. The UTMA is an extension of the Uniform Gifts to Minors Act (UGMA), the Act that allows parents to give gifts of cash and securities to their children. The Uniform Transfers to Minors Act enables parents to give their children other types of gifts including real estate, royalties, art, and patents, as well as cash and securities. Gifts valued at up to $12,000 are exempt from the gift tax.

Under the UTMA, children cannot gain access to the gifts until they reach the age of 18 or 21, depending on state law. Until that time, a custodian appointed by the donor is granted title to the property, which is transferred to a custodial account. These accounts are usually established at a bank or brokerage house. This Act, along with the UGMA, streamlines the gift process since it does not require the appointment of a guardian for the minor, trust documents, or court appointments of a trustee.

The donor is not able to restrict the beneficiary’s use of the gift after he or she gains access to it. The gift is also not protected from claims made by a spouse during a divorce procedure. Another potential drawback is the fact that the custodial account can be considered in the determination of financial aid for the child’s education and can cause a reduction in that aid. More information about the law can be found at http://www.law.upenn.edu/bll/archives/ulc/fnact99/1980s/utma86.htm.