UTMA: Can you name a successor beneficiary?

Answered by:

Question:

In an UTMA established in Illinois, can you name/establish a successor beneficiary in the event that the minor the account was originally established for dies? If you cannot name a survivor beneficiary and the minor named on the account dies, does the money become the property of the Custodian?

Answer:

Answer by Ken Golliher, BOL Guru

"No" to both questions.

There is no provision for naming a POD beneficiary on a UTMA account. As the funds belong to the minor from the date of deposit, only the minor could possibly have the right to name a beneficiary anyway. Generally, parties below the age of 18 are not considered to have "testamentary capacity."

On the death of the minor funds are payable to the minor's estate.

Answer:

Answer by Mary Beth Guard:

Some states have nonuniform amendments to the UTMA, however, so always check your state law. For example, Oklahoma enacted an amendment to the UTMA to allow the custodian of a UTMA account to designate a POD beneficiary. That provision was enacted in the mid-90s. To my knowledge, no other state followed suit.

Answer:

Answer by Ken Golliher, BOL Guru

Wow, didn't know you could do that in Oklahoma or anyplace else! What were you folks thinking, Mary Beth?

In any case, the Illinois UTMA, like the model, does not allow the naming of a POD beneficiary and provides that the funds belong to the minor's estate upon the minor's death.

First published on BankersOnline.com 2/4/02