New York estate planning lawyers are routinely consulted for advice as to the best way to give property or substantial sums of money to minor children. The trouble with such a gift is that a minor child typically cannot fully enjoy it until he or she reaches the age of majority. In New York, as in many jurisdictions, that magic age is 18.
To say that a minor child cannot fully enjoy such a gift is to say, essentially, that the world was not designed for minor children to be in control of valuable property or substantial sums of money. For example, banks and investment brokerages usually will not allow minors to have the autonomy to administer account funds as they wish. Similarly, minors cannot enter into a real estate contract should they wish to sell a piece of real property left to them as a gift.
Most gifts to minors are subject to implicit limitations on access and use because they are accomplished by way of a trust. The problem with a trust in New York is that it is subject to oversight by the Surrogate’s Court. Additionally, a trust can create a number of tax, accounting, and legal side effects that may dissuade the gift donor from making the gift in the first place.
Fortunately, New Yorkers have options when they consult a Manhattan estate planning attorney. One such option is to make a gift under the Uniform Transfers to Minors Act (UTMA). The Act, codified in the New York Estates, Powers and Trusts Article §7-6.1 – 7-6.26, sets out a system in which the intending donor makes an irrevocable gift to a Custodian for the child. In practice, the custodianship arrangement is accomplished with language transferring property or money to any adult or trust company “as Custodian for” [the named minor] “under the New York Uniform Transfers to Minors Act.” The gift should spell out that language so as to distinguish the gift from the creation of a trust or any other type of arrangement, and also to direct all interested parties to the particular body of law that governs the arrangement.
Donors should take care to designate a prudent and responsible entity to carry out the custodial duties. Custodians under the Uniform Transfers to Minors Act are not merely guardians of the property or assets, but rather are active participants in managing and growing the gift assets for the benefit of the named minor child. Custodians may invest the liquid gift assets or decide to sell the real or personal property entrusted to them if the Custodian decides that doing so would be in the best interest of the minor. Custodians are held to a reasonable prudence standard; they must exercise a standard of care “as would be observed by a prudent person dealing with property of another.” Further, Custodians are entitled to reasonable compensation and reimbursement for expenses. They may be required to account for the gifted assets in court proceedings, and so the Custodian must keep accurate and detailed records of all transactions.
On its face, a donor’s gift to a Custodian for the benefit of a minor child may appear to have many of the same characteristics of a trust. However, a Bronx trusts and estates attorney can explain the fine nuances and help evaluate whether a gift under the Uniform Transfers to Minors Act is the best way to see that your property and assets are distributed to the persons you wish in the manner you wish.
New York Trust and Estate Lawyer Jules Martin Haas, Esq. has been representing clients with respect to Estate Planning and other Trust and Estates matters in Nassau and Westchester and throughout New York State for over 30 years. If you or someone you know is involved with or has questions about an Estate or Last Will, please contact me at (212) 355-2575 or email: jules.haas@verizon.net, for an initial consultation.