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Death of UTMA Custodian in Maryland
Posted by: pappasw, June 19, 2013 11:41AM
Has anyone ran into this yet? My mom set up UTMA accounts for all my kids and my brothers kids. She was the sole custodian for all these accounts. I was told by TROWE price I need to get a "court order" designating a successor. But no one seems to know how to do that around my area. I keep running into roadblocks.. TIA.. Chuck

Re: Death of UTMA Custodian in Maryland
Posted by: Art, June 19, 2013 04:34PM
it is a legal issue now, where you have to convince a probate court (or its equivalent in MD) to issue an order appointing you or another close relative to be the new custodian.

You might get help from the Probate court clerk, in what has to be filed and how to file, or you might need an attorney's help here.

Re: Death of UTMA Custodian in Maryland
Posted by: MadDog, June 19, 2013 05:32PM
This is one form of the model UTMA language. It allows a beneficiary age 14 or older to appoint a successor if he or she does so within 60 days. Otherwise, a court has to appoint a successor. Other states may have slightly different language but I beleive that the general principle (14 years and 60 days) would be a constant. This is a good example of why a successor should be named before death.

"If a custodian is ineligible, dies, or becomes disabled and no successor has been effectively designated and the minor has attained the age of 14 years, the minor may designate as successor custodian, in the manner prescribed in subsection (b), an adult member of the minor's family, a guardian of the minor, or a trust company. If the minor has not attained the age of 14 years or fails to act within 60 days after the ineligibility, death, or incapacity, the guardian of the minor becomes successor custodian. If the minor has no guardian or the guardian declines to act, the transferor, the representative of the transferor or of the custodian, an adult member of the minor's family, or any other interested person may petition the court to designate a successor custodian."


Re: Death of UTMA Custodian in Maryland
Posted by: MadDog, June 19, 2013 05:36PM
BTW, I agree with Art about asking a clerk. Often if you go to an attorney the process may be one they are also unfamiliar with, and they may just send a young associate to the court to ask what needs to be done. You can also do this and at less cost. If that proves too difficult then you could look into paid representation.

Re: Death of UTMA Custodian in Maryland
Posted by: Bob99, June 21, 2013 02:16AM
In the section of the UTMA that MadDog quoted, it says that if the minor is under 14, or is over 14 but fails to designate a successor custodian within 60 days, "the guardian of the minor becomes successor custodian." Does that mean that it has to literally be a non-parent guardian, or is the minor's parent his guardian if the parent is still alive? If "guardian" in this context includes a parent, doesn't that mean that Chuck (the OP) is now the custodian for his kids, and his brother is the custodian for the brother's kids, without the need for a court order?

Re: Death of UTMA Custodian in Maryland
Posted by: jainen, June 21, 2013 02:25AM
>>doesn't that mean that Chuck (the OP) is now the custodian for his kids, and his brother is the custodian for the brother's kids, without the need for a court order?>>

Who cares? The broker wants a court order. The only way they would accept it without a court order is if a court orders them to.

Re: Death of UTMA Custodian in Maryland
Posted by: MadDog, June 21, 2013 11:35AM
Well I disagree with "who cares" what the law says.

The broker could also be convinced by someone showing them what MD law is.

However, with about 2 minutes of searching I found MD law. It is a little different than the language quoted above.

First, MD Code, Estates and Trusts, Section 13-318(d) provides for a successor custodian. It allows a minor, age 14 or above, to designate the successor. IF the minor fails to act within 60 days, the "conservator" of the minor is the default.

MD Code, Estates and Trusts, Section 301(d) defines a conservator to be a person appointed or qualified by a court to act on a temporary basis on behalf of a minor.

So under MD law (1) the minor can appoint a successor within 60 days, and otherwise (2) the court has to be involved.

If 60 days have not passed, show the broker the law. If it is beyond 60 days, the broker is following the law.

Re: Death of UTMA Custodian in Maryland
Posted by: jainen, June 21, 2013 01:44PM
>>The broker could also be convinced by someone showing them what MD law is. <<

Yes, that's true, at least in theory. But if the broker would accept an explanation of the law from a non-lawyer with a huge self-interest in said interpretation, I'd recommend finding a different broker!

Anyway there is more than one law; banking and securities are the most regulated industries in our economy. So I expect the broker, even the broker's own lawyer, would refuse to accept liability for the decision, regardless of what the parent downloads from the Internet.

Re: Death of UTMA Custodian in Maryland
Posted by: Sven, June 21, 2013 04:19PM
Poster, please consider this if you have not thought about it already. It is not unheard of for the value of custodial accounts funded by a person who was custodian when he or she died to be included in that person's taxable estate for federal and state estate tax. This is one great reason why custodians who funded accounts should sign off and disappear from the paperwork trail as soon as the minor is no longer a minor.

Maryland, along with NJ, where I live, are the worst states to die in with money. I would hazard a guess there should not be a federal problem if the custodial accounts are part of the taxable estate given today's $5.25MM number. Whoever is personal rep of the estate should think about my point. It may be moot if not a bunch of bucks is involved. It is one thing to fight with a broker over stuff, and you might even prevail. It is quite another thing to have to convince MD tax folks that the amounts in the UGMA's should not be subject to MD estate tax if Mom's estate is large enough to be taxed. While the money has always belonged to the child for most purposes, and should not be part of Mom's probate estate, what is part of an estate for estate tax purposes is a different world.

Re: Death of UTMA Custodian in Maryland
Posted by: MadDog, June 21, 2013 05:05PM
Well, again, I do not think the legal issue is that hard.

Since this is MD, the broker's advice was legally correct unless the beneficiary was both age 14 and could deisgnate within 60 days.

If that were true, my experience is that broker's do follow the law once it is explained to them. perhaps the individual to whom you are speaking will need to locate a supervisor, but they do end up following the law. For example, I have been told that an account cannot be opened for a trust without a copy of the trust. Where the client does not want to provide a full copy, I have had no problem explaining that a certificate of trust is sufficient, although it make take that discussion with a supervisor to get the point across.

So my point is simply that if the applicable state law permits a successor appointment outside of court supervision, explain the law rather than just bending over and incurring the expense (time and cost) of going to court. My experience si that it will all work out to follow the law.

And as an aside, I would be shocked to learn that some security law overrides the appointment of a successor custodian under the applicable state UTMA statute.

Re: Death of UTMA Custodian in Maryland
Posted by: Sven, June 21, 2013 05:21PM
The "standard drill" with respect to trusts usually is that financial institutions will ask for the cover page, the signature page, provisions rearding the powers of trustees and information on successor trustees. They really do not care about the provisions regarding who gets what and when and why,etc.

I am with MadDog that you may need to go up as high as a supervisor at a brokerage house. At some point they will follow the law once accurate facts are before them. Securities laws apply to securities. As far as I know gift to minors accounts are not now nor have ever been construed to be securities.

Re: Death of UTMA Custodian in Maryland
Posted by: Drewremedy, June 21, 2013 09:18PM
The court order may be darn close to cookbook and rubber stamp once one finds the right page of the cookbook or some prior order to appoint a new custodian in MD to use as a model --may require a bit of digging but I'm sometimes amaxed at what one can find in a decent size law library or rummanging thru case files IF you have the time --or some friendly sould will send you a redacted version of an order thier firm has found acceptable earlier--may help to ask them --problem of late has been many an institution will refuse to accept an order which does to appear to meet thier standards (been there) and things bog down until thier legal staff blesses it.

As an aside UTMA's are fatal to need based college financial aid --is you seek same--get the UTMAs to disappear by any lawful means that seem to work.



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