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If you want to make a gift to a minor, such as a child or grandchild , what options do you have so that they do not have an immediate right to that gift. As all of that have children know it is usually not in the best interest of the child to give him or her a large sum of money, which they can spend when and how they want.

Gifts can be made to a trust for the benefit of the child. This gives the donor the ability to designate the conditions that the money can be distributed and at what age the trust should be terminated. A trust is usually the best vehicle to use for large amounts of money or property or if you want very specific controls over the distribution of the funds. Two of drawbacks to a trust are that a trust document must be drafted by an attorney and an annual trust tax return must be filed.

California Uniform Transfer to Minors Act

Another option is to make a gift pursuant to the California Uniform Transfer to Minors Act (CUTMA). CUTMA is a modernization of the Uniform Gift to Minors Act, and became effective in 1985. A gift made pursuant to CUTMA is held in custodianship until age 18 unless the gift specifies a termination age beyond 18, but not over 25 years of age.

What Property can be Transferred to a Custodian?

All types of property can be transferred under CUTMA. Most common gifts are cash, stocks or bonds. But you can also gift real property, jewelry, valuable family heirlooms or partnership interests. In addition, partial interests in joint tenancy or tenants in common can also be made. To make a gift, you record the title in the child's name as a gift under CUTMA and use the child's social security number. This is a simple and standard procedure for bank accounts, stocks, bond property and other recorded gifts. For gifts of personal property, a document stating the gift is being given pursuant to CUTMA and stating the name of the custodian is required. You should contact your attorney if you are gifting more than $10,000, or are gifting property other than cash.

Who can be the Custodian?

The custodian can be any adult or trust company. An exception to this is if untitled tangible personal property is given the transferor cannot be the custodian. This limitation is put in place as a means of proving that a transfer has taken place. For example if a grandfather gifts a coin collection to his grandchild, he would probably name his child as the custodian of the collection and give him physical custody of it.

Custodian Responsibilities

The custodian's duties are threefold: (1) taking control of the property, (2) registering or recording title if necessary, and (3) managing and investing it. The custodian has the ability to "deliver or pay to the minor or expend for the minor's benefit as much of the custodial property as the custodian considers advisable for the use and benefit of the minor."


Income Tax

The minor is treated as the owner of custodial property and therefore the income is taxedto the minor. For children over 13, this can lead to tax savings if the parents are in a higher tax bracket. The custodian can use the funds in his control to pay the taxes on the child'sincome.

Gift Tax

The donor will have to prepare a gift tax return for gifts over $10,000 to any one individual in any one calendar year.

Estate Planning

A custodianship can also be created by inter vivos gifts in a will or living trust. The custodianship in this situation cannot remain in effect past age 21.

The use of custodianship for gifts will reduce the estate and corresponding estate tax of the transferor.


The use of a trust or a custodianship can help to achieve the goals of reducing an estate and controlling when a minor receives property. The use of a custodianship for smaller gifts is an alternative to keep the minor from having immediate access to cash or property and yet avoid the cost and formality of a trust.

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