A Portland Attorney explains the Uniform Transfer to Minors Act – Portland, Oregon

with No Comments

An attorney with Nay and Friedenberg discusses asset ownership options regarding minors.

UTMA is an Oregon law that provides a simple and inexpensive way for a minor to own assets without requiring trust documents or court appointment of a conservator. However, because you are relying on the terms of the law, and not preparing a customized trust, there are few restrictions or conditions that can be placed on the use of the minor’s funds.

Under the rules of the UTMA, the assets belonging to the minor are controlled by a “custodian” until the minor reaches a specified age. The parent will decide in his or her will the age at which the funds must be transferred from the custodian to the child, but can choose only an age between 18 and 25. A trust is necessary to prevent the child from obtaining outright ownership of the assets beyond age 25.

Your will should expressly mention the UTMA and you should name a custodian in your will. Most often this person is the same as your personal representative. The custodian must prudently manage the assets in a custodial account for the benefit of the minor. The law does not provide much guidance to help the custodian decide whether to spend funds for the child’s needs. Again, a trust is necessary to specify a specific purpose for the funds, such as education.  The income from custodial accounts, which are most often established at banks and brokerages, must be reported on the child’s tax returns and is taxed at whatever rate the child’s income is taxed. If the income is high enough, however, it may be taxed at the parents’ rates.

Using a trust instead of the UTMA rules is a preferred way to give minor children an inheritance. You can set any restrictions or conditions you choose, and you can name successor trustees in the event the original trustee passes away or becomes incapacitated. It is common to establish trusts for minor children that limit trust expenditures to education, or pay out partially at ages 25, 30, and 35.

Disabled children require special planning and will benefit from a special needs trusts. These trusts ensure that the child will continue to be eligible for SSI, Medicaid and other public assistance programs even upon the receipt of an inheritance. The funds in the trust are available to pay for the child’s “supplemental needs,” such as education, transportation or quality-of-life expenditures. Leaving a child an inheritance via UTMA will not protect the child from losing medical coverage when his or her parents die. A trust can avoid that problem.

An experienced estate planning attorney makes all the difference in making sure your family is protected. Contact the Estate Planning Attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.