Uniform Transfer to Minors Act (UTMA) Accounts

In 1996, the Uniform Transfer to Minors Act ("UTMA") superseded the Uniform Gifts to Minors Act ("UGMA"). Accounts established on and after January 1, 1997 should have the account title ""as custodian for (name of minor) under the NY UTMA."

One of the changes made by the UTMA was the statutory age when the custodian turns the funds over to the minor. Under the UGMA, once the minor turned the age of eighteen the custodian was required to forward the funds to the minor, unless the age of twenty-one was designated. Under the UTMA, twenty-one is the age which triggers the custodian to release the funds to the minor, unless the age of eighteen is designated. Each deposit into a UTMA account is a separate transfer, and may separately be designated for release at age eighteen or twenty-one.

The UTMA exempts third parties, including credit unions, from liability as long as the third party acts in good faith. All financial institutions have a general responsibility for safeguarding all funds at the institution, but the custodian has a legal responsibility for the funds in the account. Members may want to consult an attorney regarding any transfers under the UTMA or regarding any liability for custodians of UTMA funds.

Money transferred to a minor under the UTMA belongs to the minor and the transfer is irrevocable. The custodian, however, has the duty to hold and manage the money, to dispose of it, and to use it for the minor's benefit. The minor has the right to petition for the payment of the funds, review the records, designate a successor custodian, petition for the custodian to post bond, petition for an accounting, and acquire the funds at eighteen or twenty-one.

When a UTMA account is established at a credit union, the social security number (SSN) of the minor should be furnished and the name of the minor should be used when reporting the dividends to the Internal Revenue Service (IRS).

The credit union's duties and responsibilities with regard to establishing, maintaining, and closing UTMA accounts is a simple process:

  • The credit union should have the account read as follows: "(name of minor) by (name of custodian), as Custodian";
  • The credit union must ensure that the custodian uses the minor's SSN, the custodian signs his/her name certifying that the SSN is correct, and that the credit union uses the minor's name and SSN for IRS reporting purposes;
  • The credit union's account card must contain the language: "as custodian for (name of minor) under the NY UTMA;" and
  • The credit union adheres to the wishes of the custodian who created the account, and allows no other party (e.g., the minor, the minor's parent(s) or guardian(s) or any other third party) access to the account unless it receives a court order indicating otherwise.

A credit union acting in good faith is not responsible for making the determination of whether:

  • The designation of custodian is valid;
  • The custodian's actions are proper or authorized;
  • Either the transfer's or custodian's instrument making the transfer was valid or proper; or
  • The custodian properly applied the minor's property from the transferor.

In short, the Act relieves the credit union of all liability with regard to the custodian's authority to act and the custodian's acts themselves. Therefore, the credit union should allow the custodian to open the UTMA account, transact business with respect to the account, and close the account, without further inquiry. The only time the credit union would ever refuse the custodian to access or close the account, or honor any other third party's request with respect to the account, is when it has received a court order indicating the same.

For more information about New York State Law for the Uniform Transfers to Minors Act along with comments on most sections, contact the New York Credit Union Association's Compliance Service team at (800) 342-9835 ext. 8147, or by e-mail at compliance@nycua.org