This question came up today, as we discussed account titling. One person said that the WUTMA account is really set up to hold an inheritance gift for the benefit of the minor. I guess this is my question, can mom and dad come in with there new baby and open a WUTMA account with the money they just recieved as gifts ($20) for that child? And then make deposits for ($20) each time that child recieves birthday money or christmas money? If so, what do you do when the child gets a paper route at 12 and wants to deposit that money into the account? If they are informed that if they deposit the funds they will not have access to them, can we accept the deposit? Where does our liability end, to watch what goes into that account?
I guess I have asked more than one question here. Thanks for your input!

I am not an attorney, but this is what I know about UTMA accounts: UTMA accounts, (in Maryland, MUTMA) provide a framework for money or other property to be irrevocably transferred to a minor, but subject to control of a custodian. Custodial property is indefeasibly vested in the minor. Virtually every state has adopted its own version of UTMA. Typical UTMAs established at a bank are like guardianship accounts, but unlike guardianships, no formal court procedure is necessary to establish them. A custodian is usually named to handle the account, and has broad powers to act. The custodian had discretion to pay funds directly to the minor or otherwise expend funds for benefit of the minor without court order. The custodian is charged with duty to transfer the funds to the minor upon the minor's attainment of age (21 for custodial property created by gift, will or trust). In Maryland there is no duty on the bank's part to turn over the funds to a minor upon attainment of age.
In answer to your question, yes, a bank can open an UTMA account for a new-born baby,(or any minor, for that matter) and the parents (grandparents, etc) can deposit whatever they want whenever they want. How you set them up depends on your bank's policies: at our bank, an MUTMA Savings account for a minor has no minimum balance and no service charge. You should open it using the minor's TIN, and title it something like "Baby Smith, UTMA Minor, Mommy Smith, Custodian". If mommy comes in and takes cash out of the account, it is not the bank's responsibility to ensure that that money is being used for the benefit of the minor, but if you close the account, I would recommend using a cashier's check and make the payee match the title of the account.
As far as your questions about liability, I don't beleive you need to monitor what goes into the account either, but we have had some fraud perpetrated using these accounts. We had a parent using the kids account to cash bad checks against, and when the check was returned unpaid, we had no recourse, because we could not attach the minor's funds. We had to establsh a rule that we did not use the UTMA account for check-cashing purposes.
If a 12-year-old wanted to deposit their paper-route money into their UTMA account, there is no reason why they couldn't...its their money! I don't know if you have to advise them that they cannot access the funds; that would be a good question for your attorney. Mom could always come in and withdraw the money for them if she wanted to.
Best thing to do is read through your state's laws pertaining to these kinds of accounts, or check with your general counsel. Hope this helps.
Leslie

I AM NOT AN ATTORNEY, AND THIS IS NOT INTENDED A LEGAL ADVICE. THE OPINIONS EXPRESSED HERE ARE MY OWN AND DO NOT NECESSARILY REFLECT THE OPINIONS OF MY EMPLOYER.

Thanks Leslie, that's exactly what I was looking for!!!!!!!!!!

Leslie's answer is excellent. I'm just adding my perspective as a parent. It is my responsibility as the custodian -- and the banks in which I opened accounts for my children did indeed make this clear to me -- to manage the account, to be responsible for what goes into it and what comes out of it. It was also my responsibility (duly carried out) to explain the uses and protections on the account to my children. They have both made deposits to their accounts with money they earned, but cannot withdraw.

I'm not sure that I really told them they couldn't use the money until they were 21. I thought I'd let them figure that out for themselves!

I agree with Leslie that the bank's duty is to set up accounts that comply with legal requirements and to make disclosures to the customer. The customer takes it from there. That's what disclosures are supposed to be for.

I have a question kind of related to this issue. What if your customer has NOT set up the UTMA account, but tries to deposit a check that is payble just the way Leslie said? (Baby Doe, UTMA Minor, Jane Doe, Custodian) - can the mother just deposit that to her personal account? We say no that she would have to open an UTMA account with which to deposit that check.

Two comments on UTMA accounts:

1. First, on the check payable to child with UTMA legend and custodian listed.
   
   These checks are almost invariably interest or dividend checks from an account or investment held in UTMA form. If the custodian has other accounts with you, the check could be successfully endorsed "Jane Doe, Custodian for Baby Doe, UTMA Minor" and then endorsed again by Jane Doe individually. I don't believe the bank in this case is under notice of breach of fiduciary duty, since what Jane does with the money is outside the bank's ken. A conservative attorney might argue otherwise, I know.
   
2. Abuse of UTMA accounts: We've seen a couple of cases in which the custodian was depositing his/her paycheck, and then operating the account as if it were personal funds. After researching the matter, we've learned that the custodian was attempting to put personal funds beyond creditor/IRS reach.
   
   We ordered the accounts closed and issued bank checks payable as the accounts were held (UTMA).

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I'm having a problem with s UTMA acccount. I established an account for my minor daughter with an initial deposit of $20 about two years ago.

Shortly thereafter, my parents both died, and left my daughter some money, so I contacted the (out of state) bank to have it transfered to my daughters MUTMA (Massachusetts).

They required I get a lawyer to send them our state laws on his letterhead, to validate the account and to make sure they legally perform their required actions in the transfer.

The problem started when the lawyer discovered the sum was $30,000.

Suddenly, he informed me that a considerable amount of more tme was necessary to "properly" insure the out-of-state bank and Massachusetts were doing the right thing.

Instead of just quoting the law for the out-of-state bank (which was our agreement for which he was paid in advance) it became a "case".

He informed me that we "might have to goto court" over this simple bank-transfer, and that it would cost me more money.

Can he attach or withdraw funds from my daughters inheritance (to pay for the "additional work necessary")??

He was paid an agreed sum in advance, but as soon as he discovered the amount of the transfer, he started calling out-of-state to the other bank, getting other people in the out-of-state bank involved, quoting archaic laws that even he admits may not be pertinent, and stretching out what was a simple 1 or 2 hour job into what is now a month-long excessive amount of work, and I'm becoming of the opinion that he wants part of my daughters inheritance.

Last week he started moralizing on how "he" wants to see that no-one can touch the money, and "he" wants to make sure of that before he responds to the out-of-state bank, (all they're waiting for to finish the transfer)is the state laws to be sent to them, which he hasn't done in a month yet...

I'm a single parent, and have already been to court and recieved full legal custodianship when she was 2 months old, and there are no other problems that I can forsee, but suddenly this simple bank-transfer has become a "case", and is going to "cost me more money".

As an outside opinion, does it look like I have a problem (with the lawyer) ??

Thank you....

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Oops - that's MUTMA, nor sUMA.. sorry.

Thanks again....

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I'd like to take a moment to thank you for NOT RESPONDING.

It's nice to know that there's a place I can go to find out pertinent information from someone that has no interest in the matter.

Unfortunately, that wouldn't be any of you....
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Unfortunately some of us only get the opportunity to log in every other week or so - but it's nice to know that my input is not necessary - Merry Christmas to you!

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Anon,
To give your question something of a fresh start, I have re-posted it in the Ask A Banker Forum, the area where the public is invited to ask questions. You can follow this link to see if there have been any responses.

As Texas Trainer suggests, your question has far more to do with the law and lawyers than it does banking - only a few of the people who post here routinely could respond effectively. Your "thank you" post above may further reduce the number of people willing to make you a gift of their time.