Saturday, July 08, 2000

Savvy Strategies

Accounts designed for gifts to minors

        Problem: You want to start investing for your children or grandchildren but aren't sure how they are allowed to hold stock.

        Strategy: Look into UGMA or UTMA accounts.

        Dennis K. Jones, financial adviser at PaineWebber Inc., downtown, says the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) were created to facilitate such gifts or transfers to minors.

        UGMA and UTMA permit direct ownership of securities (and other property) by minors but require that a guardian manage the account until the minor reaches the age of majority (generally 21 in Ohio and Indiana, 18 in Kentucky). Since their creations in 1956 and 1984, respectively, the vast majority of accounts for minors have been opened pursuant to UGMA or UTMA.

        While there are slight differences in the law among the various jurisdictions that have enacted one or both of these statutes, the basic provisions are the same. Under the statutes, the minor is the sole owner of the property in the account, and the custodian is the supervisor. The transferor gives up all rights to the property, and the transfer may not be revoked under any circumstances.

        Why are there two uniform statutes instead of one? UTMA was created later to address shortcomings in the earlier statute. UGMA, however, still governs gifts of securities made in jurisdictions that have never enacted UTMA or that were made before UTMA was enacted in the governing state.

        Ohio, Indiana and Kentucky all use UTMA rules.

        There are some key differences in how these statutes were adopted by states, such as the different ages of majority. A UGMA or UTMA account may be governed by the laws of the state of residence of the donor, the guardian or the beneficiary.

        Readers: Consider Savvy Strategies as general information only and seek the help of professionals because circumstances might vary.

        Planners: Share your unique strategies with Enquirer readers. Send your Savvy Strategies to Amy Higgins, 312 Elm St., Cincinnati 45202 or e-mail


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