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Making Gifts to Minors

Many clients want to know how they can benefit their grandchildren while grandma and grandpa are still alive. One way is under the California Uniform Transfers to Minors Act. This law in California allows you to give gifts to minors under the age of a 18. The gift may be stock, mutual funds, cash, or any other asset which is then managed by a custodian on behalf of the minor. The custodian can invest the asset and add additional assets but the owner is considered the minor. The custodian can keep the assets in this custodial account until a designated age; in California the upper limit is until the child is 25 years old. At the designated age, the assets are turned over to the minor.

For example, if you want to open a custodial account for a minor grandchild and have the asset given to him at age 21, the account will be titled in the name of the custodian for the child “until the age of 21, under C.U.T.M.A.” Should the child die before the child reaches the age of 21, the asset will be part of his estate. Should the custodian predecease your grandchild before he reaches the age of 21, a successor custodian can be appointed. Often you will be choosing one of your children to act as the custodian or a trusted family friend.

Another way to benefit a grandchild is to create a trust for that child as part of your estate plan. You can specify the reasons the child would receive distributions and the ages at which the principal would be distributed. One thing you do not want to do is leave assets to your grandchildren without any type of custodial account or trust. If you do that, the minor cannot receive the gift outright and there has to be a guardianship set up for him through the probate court, something that is expensive and unnecessary if you plan ahead.

The attorneys at Scott C. Soady, A Professional Corporation can help you choose a method that fits your needs and goals for your gifts to minors. Contact us for more information or to schedule an appointment.

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