SI 01120.205 Uniform Transfers to Minors Act

The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are model laws developed and approved by the National Conference of Commissioners of Uniform State Laws and then proposed for adoption by all States through their State legislatures. Adoption of the model law is optional by the States and each State may make amendments to the Act. The UGMA was developed in 1956 and revised in 1966. The UTMA was finalized in 1986.

1. Uniform Gifts to Minors Act (UGMA)

All States and jurisdictions in the United States adopted the UGMA in some form. This Act allows donors to make gifts to minors that are free of tax burdens. Since the inception of the UGMA, many States have added amendments to expand the types of property that can be made the subject of a gift under the Act. As a result, the UGMA lost some of its original uniformity. Consequently, individuals making transfers under their State’s UGMA could not be assured that other jurisdictions would recognize the transaction and subject it to rules that were the same or substantially similar to the rules in their state.

2. Uniform Transfers to Minors Act (UTMA)

The UTMA offers all States the expansive approach some of them had already taken and makes a variety of other improvements over the UGMA. Under the UTMA, any kind of property, real or personal, tangible or intangible, can be transferred to a custodian for the benefit of a minor. Under UGMA, only gifts of cash or securities are permitted. The UTMA covers not only outright gifts, but also other transfers, such as payment of debts owed by a third party to a minor and transfers of property from trusts or estates. In some cases the minor’s own assets can be transferred to an UTMA. The UTMA incorporates the provisions of UGMA and broadens the scope of the law to include not only gifts, but also transfers to minors. For clarity, UTMA will be used in place of UGMA throughout this section. The UTMA is only effective in states that have adopted it (as of this writing, only South Carolina and Vermont have not adopted the UTMA) and each State may modify their UTMA statute. The instructions in this section provide general guidance on the model Act and thus regional instructions and regional program staff should be consulted when evaluating specific UTMA issues.