Uniform Transfers to Minors Act

Minors do not have legal capacity to contract or deal with assets. They have no capacity to sue or be sued. For this reason minors do not usually hold title to property in their own name. Instead title to a minor's assets is usually held by a guardian or property is given to a trustee to hold for the benefit of the minor. Guardianships and trusts are expensive and for that reason, among others, are not suitable for smaller amounts of money or other property. For this reason Illinois and most other states have statutes similar to the Uniform Transfer To Minors Act.

In Illinois the Act allows a transfer to be made to a custodian for the benefit of the minor. The Act specifies the consequences of the transfer and the rights and duties of the parties. There are no documentation requirements beyond the form of the transfer itself. There are particular requirements for different kinds of property, but generally the document of transfer must state that the transfer is being made to a named custodian to hold for a named minor and the document must state the transfer is being made under the Illinois Uniform Transfers to Minors Act.

The transfer can be made to any adult or a trust company except in certain cases such as a transfer from a trust or estate where the adult must be a member of the minor's family. The transferor can be the custodian.

The transfer can be accomplished by any written document which is effective to transfer title. The Act covers all types of property, including real estate.

The transferor, an adult member of a minor's family, a minor's guardian and the minor if over 13, have various rights to an accounting and to enforce the terms of the transferor.

The custodian is obligated to invest and reinvest the custodial property as would a prudent person of discretion and intelligence who is seeking a reasonable income and the preservation of capital, although the custodian may keep it in a bank account. The custodian who does not take compensation, is not liable for investment losses unless they result from bad faith intentional wrongdoing or gross negligence or failure to meet the standard of investing required by the Act.

The custodian is not personally liable for custodial contracts if the custodian makes clear that the custodian is contracting in the custodial capacity.

The custodian is entitled to reimbursement of expenses and reasonable compensation.

When the minor reaches age 21 in the case of gift transfer, or age 18 for some other transfers, the custodianship terminates and the ex-minor holds title in his or her own name.

During the custodianship the custodian can pay the custodial assets to the minor or pay them to third parties for the minor's benefit. The standard is what the custodian considers advisable for the use and benefit of the minor.

This Act allows parents to make yearly gift tax exempt gifts to their children without creating expensive trusts. The drawback is that the children get the assets without restriction at age 21. The Act also allows smaller amounts to be distributed from estates or trusts to custodians for minor beneficiaries without guardianships or trusts being set up.

Donald M. Thompson * 55 W. Monroe #3950; Chicago, IL 60603
Ph: 312-782-0844 * Fax: 312-201-1436 * Email: donthompsonlaw@sbcglobal.net