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Tampa Estate Planning Attorney > Blog > Asset Protection > Some Estate Planning Tools to Consider When Planning for Minors

Some Estate Planning Tools to Consider When Planning for Minors

Its pretty common—and in fact pretty normal—for someone to want to provide for their children when the kids grow up. Surely, you can stuff money in a savings account or a mutual fund or some other investment vehicle. But the problem is that if you keep the funds in your name, they could be subject to your creditors, or you could incur whatever tax penalties come with the assets that you’re holding in your name.

But Florida law has two specific ways that someone can plan for a minor child’s future that allow you to hold property for the benefit of a minor, without having to worry about those assets being legally considered yours.

Florida Vehicles For Planning for Minors

Florida has both a Uniform Gift to Minors Act (UGMA) and a Uniform Transfer to Minors Act (UTMA). There are certain pros and cons and similarities and differences to using each.

Both acts are similar in that an adult, usually a parent or guardian, is the custodian. The custodian will deposit the assets or funds, manage them, and make decisions about the funds. Anybody, not just the custodian, can deposit assets into the accounts.

With both accounts, the custodian can withdraw at will. That’s different from a trust, where there may be additional restrictions or parameters on withdrawing funds.

However, with both the UGMA and UTMA, withdrawals must be for the benefit of the minor child. This standard can be pretty broad, so long as the funds are used to the minor’s benefit. This could include money for a car, for tuition, or medical expenses.

The accounts aren’t income-tax free. However, some portion of what’s deposited may be taxed at the child’s rate, and not the adults.

A UGMA is good until the minor reaches the age of 18, and new laws have extended the length that a UTMA can be used from 21 to 25. A UTMA account can accommodate physical property (real estate, cars, etc), whereas the UGMA is only for monetary assets or investments.

Are These Accounts Right For You?

It’s important to remember however, that the lack of structure and requirements for these vehicles can have significant negative consequences. Mainly, once the child becomes an adult, there are no restrictions on how they use the funds. So if you’re looking to earmark specific property, you may want to try a different vehicle, such as an educational savings plan. Further, under the new UTAM law, when a child reaches age 21, he or she may withdraw the assets in an UTMA account, even if the UTMA account is set to terminate when the child reaches age 25. And neither account has the benefits that other investment vehicles like educational plans, annuities, or trusts may have. Still, their flexibility and ease of use can make them valuable tools when planning for a child, particularly when the value of the assets going into the UTMA or UGMA account is relatively low.

There is usually more than one way to accomplish your estate planning goals. Contact Tampa business and probate attorney David Toback to discuss your needs and make sure you understand how to best plan all areas of your estate.

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