Custodial Accounts for Minors

You may make a gift under the California Uniform Transfers to Minors Act and avoid the complications of setting up a trust or guardianship.  Any person may transfer property to a custodian for the benefit of the minor.  California sets forth the specific requirements for transfer of various assets.  The person making the transfer (donor) may serve as the initial custodian for certain types of transfers such as real property, bank or brokerage accounts, securities, etc. A custodian may give to or pay for the minor any of the custodial property which the custodian considers advisable without court order.  Generally, custodianship exists only until the minor reaches the age 18, unless the donor has extended the period of time in the transfer documents.  The donor can extend the custodianship to age 21. The advantages of a custodial gift are that it is easy to make and less costly to administer than a guardianship or Trust.  There is no court supervision.  No bond or accounting is generally required. Income Tax - Any income from the custodial property is taxable to the minor and subject to the Kiddie tax if the minor is under age 14.  To the extend that minor's parents use the income to pay for their own legal obligations to support the minor, that income will be taxed to the minor's parents.  Gift Tax - A gift to a minor that meets the requirements qualifies for the $10,000 annual gift tax exclusion.  Estate Tax - The property gifted may be included in the donor's gross estate if the donor is serving as custodian at the time of his or her death.

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