Closing a UTMA Custodian Account

    Closing a UTMA Custodian Account

    Closing a UTMA Custodian Account 150 150 Kamilla Mishiyeva, Esq.

    Closing a UTMA Custodian Account

    Closing a UTMA Custodian Account

    Many times do parents, grandparents and the like, set up Uniform Transfers to Minors Act (UTMA) bank accounts for minors as an inheritance tool for when they attain adulthood. These types of accounts can be in the form of a savings, checking, or money market account. Although the minor is the owner of the funds, the designated custodian is the only person who has control over the account. As the control person, the custodian has the power to manage, invest, and reinvest the money in the account, and can withdraw the funds, at his or her discretion, as long as the withdrawal and the expenditures benefit the minor.

    Terminating the UTMA

    The establishment of a UGMA custodial account creates an irrevocable gift to the minor as of the date of the creation. Even though the money may have been contributed by the custodian or a third party, the property nevertheless belongs to the minor.  Upon reaching the statutory age, and providing identification, the beneficiary is entitled to the money without the intercession of the custodian.  Unfortunately, while the law is clear when the property must be delivered to the owner, many times the custodian refuses to turn over the funds or in some cases, depletes the assets prior to the minor’s coming of age.  These two situations appear time and time again. Although terminating a UTMA account should be as easy as producing a driver license or a birth certificate showing the owner’s present age, the stubborn fact remains that the majority of banking institutions will not release the account to the owner without the custodian’s consent.

    Pursuant to UTMA law, when the custodianship over the account terminates depends on the date of creation.  UTMA is only applicable to custodian accounts created on or after January 1, 1997.  For accounts created on or before December 31, 1996, the applicable statute is The Uniform Gifts to Minors Act (UGMA). Under the UGMA, the age of termination is when the owner attains 18 years of age. Termination under the UTMA is set at age 21, unless the creator of the account elected for the termination to be at age 18.  The custodian is required under the law to deliver the funds to the owner upon the minor attaining the age of 21 years, or to the minor’s estate in the event of his death.

    Courses of Action

    If efforts to negotiate with the custodian or the bank have proved unavailing, you can consider taking the following courses of action:

    Demand letter to custodian – in order for the letter to have an effect on the recipient, you should hire an estate lawyer who is knowledgeable on the subject matter to draft a demand letter to the custodian. Why do I specifically say an estate lawyer and not a contract lawyer, or any other lawyer?  Because U.T.M.A law is governed by the New York Estates, Powers and Trusts Law (EPTL).  The letter should cite the relevant UTMA law, set a firm deadline for a turn-over of the account, and inform the custodian of the consequences if he or she fails to comply.

    Letter to the Bank – if the correspondence to the custodian is greeted with no response or refusal, a letter to the bank from an estate attorney citing the pertinent statute, enclosing copies of the driver license and birth certificate of the owner (if readily available), and further steps to be taken in accordance with the statute, may produce immediate results by the bank.

    Lawsuit – if communications to the custodian and the bank have not changed matters, the appropriate procedure for a NY estate attorney is to bring a proceeding against the custodian and the bank.  In the proceeding, you can request an accounting, compel the delivery of the property, and plead conversion if the funds have been depleted or misappropriated.

    Contact Us

    If you need help terminating or closing a custodian account, we can help. Feel free to give us a call at 646-233-0826.

    Attorney Advertising. This page is designed to provide general information. It is not intended to be legal advice. It can not and should not be substituted for proper legal representation. You should consult an attorney for legal advice regarding your rights as every case is unique and requires in depth analysis and preparation. Do not submit confidential information through this website. Contact initiated through this website does not create an attorney-client relationship. We make no warranty or guarantee of the accuracy or reliability of information contained herein.

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