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What type of trust do I need to help oversee my children's monetary gifts from their grandparents?

What type of trust do I need to help oversee my children's monetary gifts from their grandparents?

Q: Do UGMA accounts still exist?

Yes, UGMA accounts still exist and are a valid way to transfer assets to minors. However, many states have adopted UTMA, which offers more flexibility in terms of the types of assets that can be transferred. It's important to check your state's current regulations regarding UGMA accounts, as they may vary.

Full question:

I want to set up some form of a trust for substantial monetary gifts received for my children from their grandparents. They have UTMA accounts set up already. I want to have some control over the new funds until the children have finished college. What type of trusts are available?

Category: Trusts
Date: 04/07/2025
State: Alabama

Answer:

See Form US-00741BG on our website for an example.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Can you put UTMA in a trust?

Yes, you can place UTMA (Uniform Transfers to Minors Act) assets into a trust. However, once the assets are transferred to a trust, they may no longer qualify under UTMA. It's important to consider how the trust is structured and the age at which the child will receive full control of the assets. Consulting with an estate planning attorney can help ensure that your goals for managing the funds align with legal requirements.

What is the gift limit for UGMA?

The gift limit for UGMA (Uniform Gifts to Minors Act) accounts is subject to annual gift tax exclusions. As of 2023, the annual exclusion amount is $17,000 per donor per recipient. Gifts above this limit may require filing a gift tax return, and the excess may count against the lifetime gift tax exemption. Always check for updates to these limits, as they can change.

Which is better, UTMA or UGMA?

Choosing between UTMA and UGMA depends on your specific needs. UTMA allows for a broader range of assets, including real estate, while UGMA is limited to cash and securities. Both accounts provide a way to transfer assets to minors, but UTMA may offer more flexibility in terms of investment options. Consulting with a financial advisor can help determine which option is best for your situation.

What to do with UTMA when a child turns 21?

When a child turns 21, they gain full control over the UTMA account and its assets. At this point, you should discuss the transition with the child, guiding them on how to manage their newfound financial responsibility. If you have concerns about their ability to handle the funds, consider discussing options for setting up a trust to manage the assets on their behalf.