November 22, 2017

The Uniform Transfer to Minors Act — An Overview

Making a Gift to a Minor in Pennsylvania without Creating a Trust

If you have property that you want to go to your child upon your death and the possibility exists that your child will still be a minor when you die, do you need to put the property into a trust to effectively transfer it? After all, isn’t it true that a minor cannot own property?

Let’s answer the second question first. Technically, a minor can enjoy some, but not all, of the benefits of ownership in property. A minor may have the use of property, but cannot exercise a right to sell, mortgage, pledge or take other legal action with respect to property.

PUTMA

Now let’s look at the first question. Under Pennsylvania law, if you do not set up a trust to manage and protect property “owned” by a minor, the Pennsylvania Uniform Transfers to Minors Act (PUTMA) will govern the transfer and management of the property. Under PUTMA, a qualifying transfer to a minor may be made in a number of ways, including by lifetime gift, through a trust or according to a will. For purposes of the statute, a minor is defined as anyone under the age of 21.

If the transfer is made during the donor’s lifetime, the donor will typically designate a person to serve as custodian of the minor’s property. If it is made by will or trust, the will or trust document should identify a custodian. However, if one is not named or the named custodian is unwilling or unable to serve, the trustee or personal representative of the estate may designate a new custodian.

One of the principal advantages of making a gift under PUTMA is the avoidance of the expense and complexity of setting up a trust. Your child receives all the benefit of owning the property while the custodian holds, manages, invests and distributes the property.

There are disadvantages to making a gift under PUTMA. The person making the gift cannot act as custodian or the property being “transferred” will be included in his or her estate for federal estate tax purposes. In addition, all property transferred pursuant to PUTMA goes to the minor on his or her 21st birthday. With a trust, you can continue to have property held and managed by others even after your child becomes a legal adult.

Contact Halligan & Keaton

At Halligan & Keaton, in Media, Pennsylvania, we have more than 60 years of combined legal experience. We provide a free initial consultation to every client. To discuss your estate planning needs with an experienced lawyer, call our office at 610-566-6030 or contact us online. We will travel to your home, a long-term care facility or the hospital to meet with you.