Gifting to Minors Under Age 18
The Caifornia Uniform Transfers to Minors Act
Similar to most other states, California law provides its residents
with the ability to give gifts to minors under age 18. While
such gifts may be given outright, doing so usually results in
a court-appointed guardianship, a costly and cumbersome process.
Giving the gift as a trust
a trustee, keeping detailed records, and filing annual tax
returns, activities that may be equally complex.
Making the gift under the provisions of the California Uniform
Transfers to Minors Act may be an acceptable alternative. Under
the Act, the assets,
which may be stock, mutual funds, real estate, cash, or any
other asset, are managed by a custodian on behalf of the minor.
The custodian may invest the assets in any way the custodian
feels is proper, but the minor is considered the owner of the
assets and his or her Social Security Number is used for tax
reporting. The taxable income is taxed to the minor, and if
the he or she is less than 14 years old, may result in a "kiddy
The custodian uses the assets until the minor reaches
age 18, at which time the assets are turned over to him
or her. The assets become part of the minor's estate if
he or she dies, and if the death comes before the minor
reaches age 18, the assets follow the rules of intestate
succession and pass to the nearest relative.
If the donor wants and specifies it, the assets in the gift
can be held back until the minor reaches age 21 instead of 18.
The assets in the gift given to the minor need to registered
in the custodian's name, thus "John Henry, Custodian for
Ben Smith until age 21, under C.U.T.M.A." Only one person
at a time can serve as the custodian, but if he or she dies
another one may be appointed.
Other ways to leave assets to someone under age 25 under the
provisions of the Act are through a will, a living
trust, or beneficiary designation.To accomplish this, the
will, trust, or beneficiary
designation must provide that the assets are held by the designated
custodian under the C.U.T.M.A. until the recipient reaches age
If the donor is also the custodian of the gift and dies before
the gift passes to the recipient, the full value of the assets
will be taxed in the donor's estate. To avoid this, the custodian
and the donor should be different people. If Ann Smith wants
to give her eight year old granddaughter a gift and acts as
the gifts custodian, if she dies while still the custodian,
the gift will be taxed in Ann's estate. If Ann named her daughter
as custodian instead of herself, then none of the assets in
the gift are taxable if Ann dies. THE MAMOLA LAW FIRM, APC is conveniently located throughout Orange County. For additional information, please contact us at (949) 333-6543.
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