UTMA Accounts Are a Simple Way to Save Money for Your Grandchildren
If you are a Baby Boomer, bankrolling your children’s college education was probably no simple task. Even if you set aside money every month from the time your children were born, even if you diligently researched scholarships and financial aid for which your children were eligible, and even if your children attend universities in your home state, the price tag was still enough to make you catch your breath. There were tears and fights over the FAFSA, even more so if you are divorced. Your children took out student loans, which might not be all the way paid off to this day. Now consider how much the price of college tuition has increased over the past 30 years, and think of how much your children will struggle to pay your grandchildren’s tuition. A UTMA account might be one of the easiest ways to save money to benefit your grandchildren when they become young adults. Before you open a UTMA account for a young family member, it is a good idea to discuss this option and others with a Central Florida estate planning lawyer.
What Is a UTMA Account?
UTMA stands for Uniform Transfers to Minors Act, the law that provided for the creation of these accounts. A UTMA account is a custodial account, where the person who sets up the account (you) is the custodian, who controls the money until the beneficiary (your grandchild) becomes an adult. You can set the date that the account closes and the funds transfer to the beneficiary at any time between the time the beneficiary turns 18 and the time they turn 25. It is possible to open a UTMA account without hiring a lawyer; the result is similar to a trust, but the procedures are much simpler.
Less Spoiled Than a Trust Fund Baby? A Cautionary Tale
Did you hear the one about the girls who sued their grandfather because he helped their father pay child support? It sounds like a clickbait news story, but the court’s decision illustrates an important legal difference between UTMA accounts and some other means by which people might save money for young family members. In this case, Irving set up a UTMA account for his two granddaughters when they were babies. When his son, the girls’ father, got divorced, Irving took money out of the UTMA account, assuming that this would not cause any problems, because the money was going to support the beneficiaries. When the girls became adults and received the UTMA money, they found out that their grandfather had withdrawn money to help their father pay child support. Instead of saying, “Thanks, Dad! Thanks, Grandpa!” they asked their grandfather to return the money, and when he didn’t, they sued. The court ordered Irving to pay his own granddaughters more than $200,000 in damages, because the money in a UTMA account belongs to the beneficiary, not the custodian.
Contact an Attorney Today for Help
An experienced Clearwater estate planning lawyer can help you find cost-effective ways to save money for your grandchildren. Contact William Rambaum for a consultation.