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Can UTMA Account Be Used As Collateral?

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Question: 
Can a TXUTMA CD account be used as collateral on a loan?
Answer: 

Simple answer is no.

[Editor's note: Texas's Uniform Transfers to Minors Act, as all other states' UTMAs, requires that the property under the UTMA custodian's control be reserved for the use and benefit of the minor. Pledging any of that property to secure a loan that is clearly for the minor's benefit might be acceptable, but pledging it for any other purpose would be a breach of the custodian's duty. A lender accepting such a pledge would be on notice of such a breach, and could be liable to the minor for any loss sustained. On balance, it's a bad idea to get involved in such a loan. -- JSB]

First published on 03/03/2014

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