Uniform Transfer to Minors Act

*Photo by Danielle Lynn is licensed under CC 2.0. *

The Uniform Transfer to Minors Act is a piece of legislation adopted by several states, including Arkansas, that provides a method by which property may be transferred to a minor who would otherwise be unable to receive the property on account of his or her age. Through the Uniform Transfer to Minors Act, the giver can transfer almost any kind of property to a custodian for the benefit of the minor.

The gift is made by registering the asset or depositing the funds in the name of the donor, another adult, or a trust company as the custodian for the minor child pursuant to the terms of the Uniform Transfer to Minors Act. While another person serves as the custodian of the property, the child nevertheless holds title to that property.

Tax Implications

For gift and estate tax purposes, the transfer is considered a completed gift, meaning that the gift is potentially taxable at the time of the transfer but also no longer included in the giver’s estate. If, however, the giver acts as the custodian of the gift, the property has not left the giver’s estate. This means that if the giver is still acting as custodian of the gift at his or her death, it will be included in that giver’s gross estate for estate tax purposes.

For income tax purposes, the income from the property is considered to be the child’s and is taxed accordingly. If, however, the property’s income is utilized to discharge the giver’s support obligations for the child—such as court-ordered child support payments—then the grantor can be charged and required to pay income tax on the property’s income.

Benefits of the Uniform Transfer to Minors Act

A gift through the Uniform Transfer to Minors Act can be created during the giver’s life or at the giver’s death through a will. It provides an additional option for making such gifts besides forming a trust. Since this method is often easier and less expensive than setting up a trust, the Uniform Transfer to Minors Act serves as a valuable gifting tool, particularly for simple gifts.

Another major benefit of the Uniform Transfer to Minor Act is that it allows for the giving to a minor child without the presence of an appointed guardian. It also allows gifts to take advantages of the annual gift tax exclusion amount, currently set at $14,000.  For purposes of this act in Arkansas, a minor is anyone under the age of 21.

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See Also:

“Do I Need a Will?”

Parents Dying Without a Will