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Subsection 14(c) of the UTMA
Posted by: toddjameson, February 28, 2013 02:38PM
I suspect that this subsection is widely misunderstood in case law: it is not a prohibition against using UTMA funds for support of the minor beneficiary. (Whereas all the other subsections in section 14 use the verbs "may" or "shall," this section uses the verb "is.") Rather, where local law in some states broadly prohibits using assets of the child for his support (and would therefore cause the IRS to attribute UTMA income to the parents when used for the child's support), this subsection tells the IRS that an exception to this rule has been created under UTMA subsection 14(a).

Is this correct? Could someone help me to flesh this out?

Re: Subsection 14(c) of the UTMA
Posted by: toddjameson, February 28, 2013 02:55PM
To give an example, is the purpose of this subsection to tell the IRS that my purchases of breakfast cereal for my daughter with funds from her UTMA account should not be taken as spendings properly falling under my legal obligation to support her because the UTMA has created a statutory exception?

Also, how does the "does not affect any obligation of a person to support the minor" language work? Whether it affects or doesn't affect the obligation, hasn't the "in addition to and not in substitution for" language of this subsection already instructed the IRS that income used to buy breakfast cereal should not be attributed to me?


Re: Subsection 14(c) of the UTMA
Posted by: Drewremedy, March 1, 2013 07:07PM
Kaye has a pretty good explanation of this on the board as to proper use of funds .

Of course it gets more interesting of the UTMAs are used by waring parents to shift large sums about and then seek to undo them or recharacterize then as to college aid formulas (roll it into a 529/UTMA can clip 75% of the aid impact exposure) or to use them to meet child support orders --apparently OK ....

Re: Subsection 14(c) of the UTMA
Posted by: Bill Brown, March 3, 2013 02:21PM
Or, you could hire an attorney who specializes in this area.

Or, I know this is a stretch, you could meet your parental obligations without trying to arabesque around the intent of the UTMA.

Jus' sayin'.



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