The Georgia Transfers to Minors Act

Gifting to a minor, whether lifetime or upon death, can be an excellent opportunity to ensure the happiness and wellbeing of a child or grandchild.  Oftentimes, lesser gifts, such as small presents or minor cash amounts, are given outright to the minor.  This practice helps the minor learn the value of money by giving them the freedom to purchase something now or to save for more expensive items in the future.  While this practice works well for small gifts, great care should be given when transferring larger sums to a minor. often use trusts when they transfer large amounts of money to a minor.  Trusts give the donor the security of knowing the gift will benefit the minor in the future because trusts often protect the gift from frivolous or immediate use.   Trusts, however, are not right for everyone.  Trusts are formal legal instruments, and as such can be expensive to draft, implement, and maintain.  Therefore, unless the gift to the minor is substantial, it may be too costly or administratively difficult to create a trust.  What can a donor do to protect their gift to a minor without spending unnecessary time and resources creating a formal trust?


The Georgia Transfers to Minors Act

Georgia solved this dilemma when they adopted the Uniform Transfers to Minors Act (UTMA).  Georgia calls these adopted code provisions the Georgia Transfers to Minors Act (GTMA).  In a nutshell, the GTMA allows a donor to appoint a conservator for the gift until the minor turns 21 years old.  At that time the gift fully vests in the minor, who is free to use the funds as they desire.  Thus, the GTMA is a hybrid between an outright gift and a formal trust.      The following is a step by step guide to showing you how easy it is to set up a custodial account under the GTMA.


How to Set Up a Custodial Account Under the GTMA

1. Jurisdiction

Georgia allows significant jurisdictional leeway when using the GTMA.  The transferor does NOT have to live in Georgia to take advantage of the GTMA.  In fact, neither the custodian nor the minor need to live in Georgia so long as the custodial property (the property being transferred) is located in Georgia.  Additionally, after the requirements are satisfied and the custodial account is created, the property, the transferor, the minor, and the custodian can all be located outside of Georgia if they decide to move.

2. Contingent Interests

The GTMA allows you to make a gift contingent upon the occurrence of a future act.  For example, you can condition the gift on the minor attending college, graduating high school, etc. The gift does not vest (i.e. you can take it back) until the minor meets the condition.

3. Nomination of Custodian

The custodian cares for the gift until the minor turns 21 years old.  The transferor can name almost anyone as a custodian for the gift, but it is usually the minor’s parent.  The transferor may also name subsequent custodians if their first choice becomes unable or unwilling to act as custodian.  If you are making this gift in your will, you must nominate the same person as conservator for both the GTMA gift and the general conservator nomination in your will.

4. Creation of Custodial Account

Most GTMA transfers will involve a gift of cash or securities; however you can transfer other property under the GTMA as well.  The gifts are commonly made to a financial institution, such as a bank, credit union, savings institution, or trust company.  The account may be in the name of the transferor, the custodian, or a trust company.  All transfers MUST explicitly state they are made for the benefit of the minor under the GTMA, such as “as custodian for (name of minor) under ‘The Georgia Transfers to Minors Act.”  Once the transfer is made into a custodial account, the gift is irrevocable and cannot be taken back.  Most banks and credit unions are familiar with these custodial accounts, and welcome the opportunity to discuss them with you.

5. Multiple Beneficiaries

If the transferor wants to make gifts to multiple minor beneficiaries, they must create separate custodial accounts for each minor.  Similarly, only one person may be a custodian of the property at any given time.  However, the GTMA allows a corporation to act as a custodian.  Therefore, transferors that are worried about custodial mismanagement still have the opportunity to have several professional sets of eyes on the custodial account.

6. Conservator Duties and Forbidden Actions

After the transfer, the GTMA allows the custodian to invest the custodial assets.  Interestingly, the custodian will NOT be bound by other laws concerning fiduciary investments.  This allows the custodian to make riskier investments than may be permissible under a traditional trust arrangement, which may in turn allow for a higher return on investment.  The custodian is however forbidden from transferring the custodial assets into the custodian’s own accounts for any reason.  Custodians must keep records of all activity made with custodial property, and must file reports with the parent or guardian of the minor after the minor has reached 14 years of age.

7. Closing the Custodial Account

The custodial account terminates and the funds are dispersed to the minor when the minor turns 21 years of age.  At that point the minor is free to invest or spend the funds as they deem fit.  This is a good opportunity to talk to the beneficiary about investing and financial planning.

Questions?  Contact us here.


–        Norris Legal, L.L.C.


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