Subject: Tax Code - Uniform Gifts to Minors Act(UGMA)Last-Revised:Mar !""# Contributed-$%: Art &am'et (art(am'et at ao')com)* Aaron Sc+ind'er* Mar( ,c(en-i'er* $rian Mor(* Ric+Carreiro (r'carr at animato)ar'in.ton)ma)us) T+e Uniform Gifts to Minors Act (UGMA)* su/erceded b% t+e Uniform Transfers to Minors Act(UTMA) in some states* is sim/'% a -a% for a minor to o-n /ro/ert%* suc+ as securities) T+e UGMA0UTMA setu/ is common'% used to .ive monies to a minor) 1RS re.u'ations a''o-s a/erson to .ive man% t+ousands of do''ars /er %ear to an% ot+er /erson -it+ no tax conse2uences(/'ease see t+e 3A4 artic'e on ,state and Gift Tax for current numbers)) 1f t+e reci/ient is a minor*t+e UGMA /rovides a -a% for t+e minor to o-n t+e assets -it+out invo'vin. an attorne% to estab'is+a s/ecia' trust) 5+en .ivin. assets to a minor usin. a UGMA0UTMA* t+e donor must a//oint acustodian (t+e trustee)) An UGMA0UTMA is a trust 'i(e an% ot+er trust exce/t t+at t+e terms of t+e trust are set in t+e statestatute instead of bein. dra-n u/ in a trust document) S+ou'd a trustee fai' to com/'% -it+ t+e termsof t+e UGMA0UTMA* t+is -ou'd ex/ose t+e trustee to t+e same actions as a trustee -+o fai's tocom/'% -it+ t+e terms of a s/ecia' dra-n-u/ trust) 5+% is a UGMA usefu'6 T+e UGMA0UTMA offers a strai.+tfor-ard -a% for a minor to o-n securities)1n most (a''6) states* minors do not +ave t+e ri.+t to contract) So a minor cou'd not be bound b% an%bro(er7s account a.reement) 1f a bro(er too( a minor7s account* t+e minor* u/on reac+in. majorit%*cou'd re/udiate an% 'osin. trades and ma(e t+e bro(er eat t+em) T+us bro(ers and fund com/aniesonce refused to ta(e minor7s accounts) UGMA0UTMA -as basica''% a -a% of /rovidin. a form ofo-ners+i/ t+at .ot around t+is /rob'em* -it+out forcin. /eo/'e to .o t+rou.+ t+e ex/ense of +avin.an attorne% dra- u/ a s/ecia' trust) To estab'is+ a UGMA0UTMA account* .o to %our friend'% nei.+bor+ood stoc(bro(er* ban(* mutua'fund mana.er* or (c'ose %our e%es no-: S8L)* etc) and sa% t+at %ou -is+ to o/en a Uniform Gifts (insome states 9Transfers9) to Minors Act account) :ou re.ister it as: ;