Illinois Estate Planning and Elder Law Blog
Custodial accounts are created by adults as custodians for minor children. Both the custodian and the minor must be residents or resident aliens of the United States. The accounts are established under the Uniform Transfers to Minors Act (UTMA).
A custodial account is an account created with property gifted by an adult. It is a gift under the Internal Revenue Code and can be used for annual gift tax exclusions up to $14,000 per year per child to whom the gift is made.
The account is irrevocable and cannot be terminated by the adult.
Money, securities, U.S. savings bonds, life insurance, annuities, partnership interests, real property and tangible personal property can be transferred to the UTMA account.
The account assets can be used for the benefit of the minor prior to the minor reaching the age of majority. The custodian is the only individual who can access the account.
The identification number on the custodial account is the minor’s social security number. Any income earned will be reported to the IRS under the minor’s social security number and taxed to the minor.
Consult your estate planning attorney for further information.