All States and jurisdictions in the United States adopted the UGMA in some form. This Act allows donors to make gifts to minors that are free of tax burdens. Since the inception of the UGMA, many States have added amendments to expand the types of property that can be made the subject of a gift under the Act. As a result, the UGMA lost some of its original uniformity. Consequently, individuals making transfers under their State’s UGMA could not be assured that other jurisdictions would recognize the transaction and subject it to rules that were the same or substantially similar to the rules in their state.

The UTMA offers all States the expansive approach some of them had already taken and makes a variety of other improvements over the UGMA. Under the UTMA, any kind of property, real or personal, tangible or intangible, can be transferred to a custodian for the benefit of a minor. Under UGMA, only gifts of cash or securities are permitted. The UTMA covers not only outright gifts, but also other transfers, such as payment of debts owed by a third party to a minor and transfers of property from trusts or estates. In some cases the minor’s own assets can be transferred to an UTMA.

The UTMA incorporates the provisions of UGMA and broadens the scope of the law to include not only gifts, but also transfers to minors. For clarity, UTMA will be used in place of UGMA throughout this section. The UTMA is only effective in states that have adopted it (as of this writing, only South Carolina and Vermont have not adopted the UTMA) and each State may modify their UTMA statute. The instructions in this section provide general guidance on the model Act and thus regional instructions and regional program staff should be consulted when evaluating specific UTMA issues.

An individual who transfers money or property to a custodian on behalf of a minor.

An adult designated by nomination to receive, maintain and manage custodial property on behalf of a minor beneficiary.

Any interest in property transferred to a custodian on behalf of a minor beneficiary under the UTMA, including any income or proceeds resulting from that transferred property.

An individual who has not yet attained the legal age of majority as established by state law.

An individual who has attained the legal age of majority as established by state law.

A transaction that creates custodial property.

A transfer in which the donor relinquishes all control of the custodial property and retains no legal authority to revoke their release of the custodial property.

If funds belonging to the minor are placed in an UTMA account belonging to the minor, the account may be considered a device similar to a trust (SI 01120.201B.5.). For example, a minor’s parents place the minor’s funds in an UTMA account for the benefit of the child. If you determine that an UTMA account should be considered a device similar to a trust, evaluate the account under the trust rules in SI 01120.200 – SI 01120.203.

Although transfers under the UTMA are irrevocable and convey legal title to the minor, you may encounter a situation where the custodian takes possession of the UTMA property or closes the UTMA account just prior to the time the minor reaches the age or majority contrary to State law. This may be an attempt to manipulate the UTMA provisions to establish or maintain SSI eligibility. If an UTMA account is revoked or closed by the donor or custodian before the minor reaches the age of majority, the action you take will depend upon whether fraud or similar fault exists.

NOTE: Fraud or similar fault development is not necessary if the UTMA account has been closed because all of the funds have been disbursed by the custodian to or the benefit of the minor.

During an initial claim, UTMA accounts should be processed as follows:

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  Request a written document from the custodian or donor (e.g., a deed, appropriate titling on a certificate of deposit, savings passbook, etc., reflecting it is being held by an adult custodian under a State Uniform Transfers to Minors Act, other transfer document referring to an adult custodian with reference to the State UTMA or other documentation that satisfies your State UTMA statutory requirements) to confirm an allegation of an UTMA transfer.

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  If there is no document designating an UTMA transfer, do not develop further. Instead, proceed as if there had been no allegation of an UTMA transfer.

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  If there is evidence that questions the validity of an UTMA account, follow regional instructions regarding legality of gifts or transfers. In the absence of such instructions, consult with your Regional Office (RO) program staff. If necessary, the RO staff will request the documentation needed for possible submission to the Office of the General Counsel.

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  If there is a valid UTMA account and the minor is an SSI recipient, see regional instructions to confirm the State's legal age of majority. Also, input “UTMA” to the CG field, followed by the account balance and the month and year in which the minor will attain majority. For example, in a State where the legal age of majority is 21, a $6,000 UTMA transfer to a child born June 10, 1990 would read: “UTMA,6000,0611.”

During a prior redetermination, the FO established that G. Smith irrevocably transferred under the UTMA, the sum of $10,000 to their grandchild, E. Smith, a 14-year-old SSI beneficiary. At the current redetermination, E.'s parent, who is the custodian of the account, volunteers that E.'s parent withdrew $1,000 from the account to pay for a 3-week vacation for E. at a summer camp with special facilities for disabled children.

Regional instructions confirm that there are no legal prohibitions in the State that preclude UTMA withdrawals for a minor's benefit. The CR determines that the withdrawal is not income to E. because the custodian did not disburse it to E. nor does it represent a third party vendor payment of food or shelter. The CR updates the CG field to show the new UTMA balance.