Can I Really Convert an UTMA / UGMA into a Trust? – A Kiss Trust Blog


Are you a parent panicking because your child’s UTMA or UGMA assets will soon be dispersed, yet your child is not mature enough to handle a large amount of money, or worse, could do harm with it?

What if you could transfer those assets into a trust that would allow you to put restrictions on when and how they could spend that money?

A Kiss Trust will do just that!

UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gift to Minors Act) accounts have been used throughout the years to save for minor beneficiaries.

With an UTMA / UGMA account, the minor child (Beneficiary) is granted full access and control over the assets upon attaining the age of majority (18 to 21, depending on your state law). This happens whether or not the donor desires this, or not.

How Best to Retain Control And Delay Access?

The most common method for retaining control over assets is to create a trust to succeed the UTMA / UGMA. A new irrevocable trust can be created, with the minor child as the Beneficiary. A trust company is typically the new trustee and replaces the UTMA/UGMA Custodian.

A Kiss Trust is an easy to set-up low cost irrevocable trust that will give you the absolute guarantee that your money will only be used for when and what you intend it for.

Kiss Trust provides a turnkey UTMA / UGMA transfer solution that allows for the preemptive transfer of UTMA / UGMA assets into an irrevocable trust. This allows you to customize how and when the assets may be used.

Asset protection and beyond

A Kiss Trust not only offers asset protection from third-party creditors and divorcing spouses, it also has so many other benefits. (Read Benefits of a KissTrust)

How Can UGMA and UTMA Accounts Be Restricted Past The Age Of Majority?

First let us review the UTMA / UGMA rules:

Each UTMA / UGMA account has only one Beneficiary (a minor child) and one Custodian (usually a parent).

The Custodian has “all rights, powers, duties and authority over such assets.”

•However, once the Beneficiary turns the “age of majority”, the Beneficiary has full and unfettered access to the account.
•Money saved into an UTMA / UGMA account is irrevocable, and the Custodian cannot use UTMA / UGMA assets for the benefit of anyone other than the minor for whom the account was created.
•The Custodian of an UTMA / UGMA account may use “so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order.” Thus, there is a clear basis for the Custodian’s discretion to use the assets for the minor’s direct or indirect benefit.

As noted, when the Beneficiary attains the age of majority or dies, the Custodian must transfer the assets to the Beneficiary or the Beneficiary’s estate. However, prior to the age of majority the Custodian has the right to transfer UTMA / UGMA assets into a trust or other investment vehicle that benefits the Beneficiary.

We note that there are no known court precedents voiding the Custodian’s right to make such a preemptive transfer, so long as the new trust does not delay the availability of benefits until the death of the donors.

Thus, if the Custodian has a reasoned basis for delaying the Beneficiary’s access to the assets, and there is no dilution of the custodial assets—then preemptive delay is appropriate.

A reasoned basis can be as simple as the Custodian’s belief that the Beneficiary will use the assets to his or her harm, or that the Beneficiary may waste the assets frivolously or imprudently.

The UTMA / UGMA custodian is NOT subject to the usual fiduciary duties of a trustee—the Custodian’s only duty is that the property be used for the minor’s benefit. This “beneficial use standard” is satisfied if the Custodian transfers the property to a trust that benefits the same Beneficiary exclusively.

Converting a UTMA /UGMA into a Kiss Trust is a wise decision and will give you the peace of mind of knowing that the assets will be used for only what you desire, when you desire it.

Contact us today about transferring your UGMA or UTMA to a Kiss Trust by calling us at (540) 347-6620.

Kiss Trust is a service of Eastern Point Trust Company

See Kiss Trust reviews and what the press is saying about Kiss Trust.

Copyright 2013

KissTrust is a registered trademark of Eastern Point Trust Company.

Kiss Trust is a trademark of Eastern Point Trust Company.

The Kiss Trust concept is patented.

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