Often a will or trust conveying property to a minor will establish a new trust for the management of those assets with a trustee designated to oversee the assets on the minor’s behalf. There are times when trust language is not used and a minor inherits property. To protect those assets for the minor, a uniform law was established in 1986, and adopted in the state of Maryland, called the Uniform Transfers to Minors Act (UTMA). This allows a minor to receive gifts or inheritances with the aid of a guardian. Under the act, an appointed custodian can manage the assets until the minor reaches the age of majority. In Maryland, the UTMA account must terminate when the child reaches age 21.
The act also shields the minor from tax consequences on the gift, up to a specified value. The IRS currently allows for an exclusion from gift tax of up to $15,000 per year. The minor’s Social Security number is on the UTMA account so while this is a great way for a minor to save money without a tax burden it may impact their ability to receive financial aid or qualify for scholarships.
The donor of the gift to the minor can designate a custodian to manage the assets and that person has a fiduciary responsibility to manage and invest the assets in the minor’s best interests.
For more information on transferring assets to minors in the Greater Baltimore area, please contact Stouffer Legal at 443-470-3599.