Posts tagged CUTMA
What if I want to leave property or other gifts to a minor?

Making a gift to a minor may be difficult for a number of reasons. The minor may not be legally able to manage the property that you leave for them. In addition, they may not be responsible enough to manage the asset for their long term benefit.

For some, making gifts to their minor children may be a technique to reduce the size of their estate for estate tax purposes. Whatever the reason may be, there are a couple of options for making a gift to a minor that may be suitable depending on your specific situation.


Some people decide to use a trust as the primary vehicle for holding and managing property for a minor. The trust has the benefit of having a Trustee who can manage the trust asset and who may be granted the discretion to make distributions to or for the benefit of a minor child. This trust could be established for your child either while you're alive, or it can be set up at the time of your death.

One downside to using a trust, however, is that the cost of maintaining a separate trust for a minor child may be excessive in relation to the value of the assets held in the trust. 

California Uniform Transfers to Minors Act

Where the gift to minor person is relatively small, using a custodial account under the California Uniform Transfers to Minors Act (CUTMA) may be more attractive. Generally, the gift is held by the Custodian you select until the minor child reaches a specified age.

Figuring out the best way to transfer your assets to minor beneficiaries can be challenging. Most people grapple with the desire to provide for the child but not grant unfettered access in a way that would cause the minor to lose motivation in pursuing his or her own life goals. Estate planning lawyers can provide helpful insights on how to structure such a gift.

What are assets with beneficiary designations and how should they be treated?

One vital part of the estate planning process is making sure that assets with beneficiary designations are updated to be consistent with the other provisions of your estate planning documents. In general, this means that you want these assets to be distributed in a manner that is similar to how the other assets in your trust are distributed.

Assets with Beneficiary Designations

Generally, assets with beneficiary designations include life insurance policies, retirement accounts (such as IRAs and 401ks), as well as Pay-on-Death (aka "POD") accounts. 

Married Persons

In cases where spouses are married, it is often beneficial to have each spouse name one another as the primary beneficiary of retirement accounts. This gives a spouse the chance to inherit the other spouse's retirement account and continue the tax-deferred growth of that asset. In this scenario, usually the couples' joint living trust will be named as the secondary beneficiary on the retirement account.

Naming Minors as Beneficiaries

If your plan calls for naming minors as beneficiaries, you will want to make sure that the forms provide that the money will be held in a custodial account (often called "CUTMA" accounts) until a certain specified age (usually between 18 and 25). Without having such a provision, it's possible that a special person has to be appointed by a Court to receive and account for the money.

For some of you, especially those of you who have been diligent in contributing towards your retirement accounts, these types of assets can represent a significant portion of your assets. By planning properly, you not only ensure that the proper people receive these assets, but also significantly reduce potential tax consequences.

How do I maintain control over property I give away?

A basic function of estate planning is to make sure the people or organizations that you want to receive your property actually receives it, but have you really thought about how that would work? Would you just give a lump sum to your teenage son or daughter? If you left money for a charity, how would you know they are using it in the way that you want? What if a person you wanted to leave something to passed away before you--who would get it then? If you have a business, will your partners buy you out? Or, will your family join the business and work in it?

Some Basic Techniques

As a general rule, I think the "KISS" method works quite well in estate planning. (KISS = "Keep It Simple, Stupid") The more complications that get introduced to a distribution scheme, often the more failure points you may be introducing. That being said, there are some basic, tried and true techniques that work and are often good to implement. Here are some of them:

  1. Leaving gifts to a young beneficiary in a trust that call for distributions at various ages. Or, if the amounts are rather small, utilizing "CUTMA" to hold the property for the beneficiary until he or she reaches a certain age.
  2. Utilizing a marital trust to hold property for your spouse to give him or her lifetime enjoyment of those assets, but also ensure that specified beneficiaries (often children) will receive whatever is leftover.
  3. Providing that where a named beneficiary fails to outlive you, the property going to that person will get distributed among his descendants. This is a commonly used provision where you want to benefit not just the beneficiary you've named, but also that person's family.

If you engage an estate planning lawyer, you will undoubtedly face one or more of these concepts depending on your situation (e.g., whether you are in a relationship or have children).