There are situations when someone wants to transfer money or other property to a child and for whatever reason, usually to avoid costs, does not want to set up a formal trust. Transferring money directly to a minor may be difficult for many reasons, including that many financial institutions will not open an account for a minor since they are not able to enter into contracts. For this reason, there are laws written to create custodian accounts which would allow the transfer of money and property to children and allow some control over their accounts, without starting a trust. In any case where you are looking to transfer money to a minor, call a Long Island estate attorney to assist in making sure the transfer goes smoothly. Transfers under the Uniform Gifts to Minors Act (UGMA) allow transfers of many types of assets to an account set up for the minor’s benefit. Such accounts deal with bank deposits, insurance proceeds and securities owned by the child. On the other hand, transfers that take place under the Uniform Transfer to Minors Act (UTMA) are quite similar in how it treats the minor’s assets, but will also allow for transfer of real property and almost any other kind of assets.
Long Island UTMA and UGMA Accounts
What both of these accounts entail is a custodian, usually a parent of grandparent, managing an account on behalf of the minor, an account that any donor can put money into. At the age of 18 for UTMA assets and 21 for UGMA assets, the minor is allowed to do whatever is remaining of those assets, without interference by the custodian. Transfers or gifts made under both the UTMA and UGMA are irrevocable, meaning, for example, if they were started with the intention of being a college fund and the minor does not go to college, they would still get the remaining proceeds when they reach the age of majority.
Long Island Child Performer Trusts
Another type of custodial account exists in New York and just a few other states and is meant to meet the needs of child performers. This is called a blocked trust account or a Coogan account. Under this type of custodial account, 15% of a child performer’s proceeds must be put into a special account for that child. This minimum amount must be directly deposited into the trust, but the parents of the minor can opt to put a higher percentage in. The account proceeds cannot be touched until the child reaches the age of 18. Also, once the amount of money in the account is up to $250,000, a trust company must be hired to deal with the account. If the law when it comes to a blocked trust account is not followed, it could mean that the child performer’s work permit would be revoked for the next year, keeping them from performing. Custodial accounts are a great choice for helping to plan the future finances of a minor, especially when it comes to planning for something like college or other future expected expenses. Calling a Long Island estate attorney will help set you on the right path to figuring out which kind of account meets your needs the best. Give us a call at (516) 777-0647.