Custodian Closing an UTMA Account
Answer by Ken Golliher, BOL Guru
Question: I have an Illinois UTMA account in my son's name. He turned 18 this year. Can I withdraw the funds for him and pay the taxes myself, as custodian? Am I able to close the account and be responsible for any taxes?
Answer: There are no income tax ramifications to closing a UTMA account. Interest should have been reported to the IRS each year using your son's name and SSN. If he had enough income to require the filing of a 1040, it was taxed in the year in which it was earned. If he did not, the interest is essentially tax free.
In closing the account the bank should issue a check exactly the way the account is titled, "John Doe, beneficiary ILUTMA, Jane Doe, Custodian. You would endorse the check, "Jane Doe, Custodian" and hand it to your son. He could then endorse and cash or deposit the check.
First published on BankersOnline.com 3/21/05
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