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UGMA - minor/adult refuses to accept
Posted by: Yellowstone, June 30, 2013 09:22PM
Is it possible that an adult can refuse to accept a UGMA?

I have read through a lot of these UGMA issues on this site - but none like this:

I am the custodian. GChild is now a minor(20) but will soon be an adult (21 in Texas). Money is in a stock certificate. So far, letters written (signature return receipt requested) to the GChild's last known address come back as no response. I have about two months left, before I must turn this UGMA over to the GChild - but have no specific idea where she is (no geograghic address).

I am assuming, since there has a lot of bitterness among the adult parents, that the GChild refuses to have anything to do with this UGMA.

The 1099s each year arrive at my address; but GChild's name and SSN. The cerificate is in my safety deposit box.

What I'd like to do is redeem the certificate before it comes due - if legally possible - but also I feel I've made a commitment that must be fulfilled.

What course of action do you suggest I take at this point?

Is there a way I can coax the GChild and legally get a release from the UGMA?

It is difficult to talk to the Transfer Agent. Somehow I get the impression he thinks this situation is a reverse - that is, he may think I want to take the money and run!

Suggestions please!

Regards.

Re: UGMA - minor/adult refuses to accept
Posted by: Sven, July 1, 2013 03:35PM
Off the top of my head while you still are custodian and have the authority to do so maybe you should open a brokerage account in the name of the UGMA and deposit the certificate in street name there. That at least gets a valuable piece of paper out or your possession.

At some point after you do that you can notify the broker the child is no longer a minor and that you, as custodian, are instructing them to retitle the account in the sole name of the young woman. If you have some form of last known address, use that. If you have some kind of proof of age, send them that too. Once the broker does that they will send monthly statements, tax forms, etc. to the young woman. What may happen if she refuses to deal with her money in the account is that the account eventually will become so inactive and so old that it would escheat to the State of Texas as unclaimed property. This happens all the time with unclaimed property. Can't make the young woman do anything but the law will step in at some point if she continues to not deal with the situation.

Congrats for being a caring custodian. Most of the posts here are about custodians who are out to end run the child in some way.

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 1, 2013 05:29PM
Personally I don't think you need to do a darn thing but keep decent records . A UTMA is a completed gift the abilitY to reject a completed gift is a can of worm not required on your watch.

If you send tHe kid two letters regular mail and registered mail saying the stock or whatever is available for pick up at or XMX that's probably enough at age 21. If they chose to let it rot in place and escheat to state..so be it.

Re: UGMA - minor/adult refuses to accept
Posted by: Yellowstone, July 1, 2013 06:09PM
So, are either of you two attorneys, tax or estate officials? Earlier this year I made an appointment to discuss this with the IRS at their offices 30 miles from here. It took 30 minutes to wait for the appointment and 5 minutes to tell they had no advice - but would provide me with a publication (that had about 70 pages on IRAs and one paragragh that dealt with UGMA).

Regarding the last two memos:

I am in favor of both resolutions - but am somewhat afraid what the 'litigation' consequences may become.

Today I attempted to make cell phone contact - and am waiting for a response. Doubtful I'll receive anything.

The two recommended letters (registered and otherwise) have already been sent - still no response. The USPS indicated a pink card had been left at the doorstep. If after a few days the letter will be returned to sender.

This USPS is, of course, no indication the GChild lives at this address any longer.

Somehow I feel the onus is on me to make damn sure this UGMA is delivered. 1.> Because it is a 'gift', 2.> the constant reminder that the 1099s show up at tax time, 3.> I kind of get the impression from letters I have received the mother is behind all this. If I ever live long enough, I'd like to see what happens when the GChild is an adult and what she may do with the 'gift'.

Hopefully, after 20 years of this, she will have second and more decent thoughts - once she has received the UGMA, paid taxes, and now must live the rest of her life knowing she held out a 'tin cup' to shakedown her old grandad!

Re: UGMA - minor/adult refuses to accept
Posted by: Sven, July 1, 2013 06:35PM
I agree with Drewremedy that you don't need to much other than keep good records. To achieve a neat,clean end point, however, I believe it would be a good idea for you to formally terminate your status as custodian of the account. With the certificate in your possession one way you could do that would be to deliver the certificate to the child at age 21 with whatever endorsements by you, as custodian, are required. I am sure a broker could tell you what that involves. You have not told us how the certificate is titled.

Based on your comments that's not going to happen. Unless you feel you would be taking undue advantage of a discount broker, I would go visit one and discuss your situation. Maybe they would open a custodial account knowing you would remove your name as custodian a short while after the child turns 21. It's at least worth a shot. Otherwise, the asset--the certificate--remains in your possession and your role as custodian probably continues.

Re: UGMA - minor/adult refuses to accept
Posted by: cpw, July 3, 2013 09:17PM
I like Sven's original suggestion...get it out of your hands (to a "neutral" party) so you can't be accused of anything. Whatever records you keep will likely be the wrong ones if someone tries to make a fuss about it.

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 9, 2013 12:18PM
I fail to follow that custodian has a problem under his states version of UTMA

1. Is not a UTMA a completed gift?

2. the custodians duties are spelled out in UTMA law ....and filing the tax returns for the kid is NOT among them not even to forward the 1099 s

Re: UGMA - minor/adult refuses to accept
Posted by: DeeDee, July 10, 2013 12:13AM
He DOES have a problem, Drew. He has the stock certificate in hand and his attempts to contact the minor (soon to become of age) have not proven successful. He does not seem to have a valid contact for the minor or the minor does not seem inclined to respond to his correspondence. I don't believe it is possible to change a UTMA to an individual account for the minor without the minor's signature on the paperwork opening the individual account. And, therein lies the problem.

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 10, 2013 02:10AM
Im not sure the state law requires any specific HerculeanAs long steps to,turn over the account .

The account with the brokerage firm or whatever already exists..I.m not sure law says custodian cannot merely instruct firm to remove his name and leave it in the now. Adult name

Law allows custodian to quit.

As long as custodian has made reasonable effort to comply with turn over..Imdont see the problem??

more common issue is custodian who balks at turn over or has pocketed the funds etc....but not the problem here.

Re: UGMA - minor/adult refuses to accept
Posted by: Sven, July 10, 2013 04:57PM
Poster, is there a custodial brokerage account, because if there is I would deposit the shares in the account and do what Drewremedy suggests, which is to write the broker and resign as custodian.


Re: UGMA - minor/adult refuses to accept
Posted by: Yellowstone, July 10, 2013 11:36PM
Everyone-

There has been a major turn of events . . thanks for your patience.

I called the registrar at the last known college the GChild attended - discovered this by searching through a few Facebook accounts. (Though I am not in a 'with it' crowd of social network sites - I was able to stumble on this simple fact)

I sent another registered letter to the GChild c/o of the school - they agreed to have the letter forwarded to the GChild's campus address.

I recieved the signature and a phone call. Surprisingly there appears to be no animosity - but a lot of indifference; "GDad, just what is it?"

So, we are nearing the end of this issue - but while I called the Transfer Agent found I have made a few errors in setting this up. Since was my intention from the very beginning to keep this UGMA a secret - I used the GChild's SSN, but used my address for the 1099s. Again, the intent is/was to conceal the UGMA. BTW: I had the guidance from my Broker.

To answer a few questions from above:

I never, ever, considered this was a completed gift. (Probably because I had seen to many Perry Mason movies!). For a number of other reasons - but primarily I thought a UGMA could include stipulations; ie, "can only be used for college expenses" or "to buy a Corvette". Secondarily, the dividends are/were plowed back into another account with the same SSN attached - making it an active and incomplete account. Both the Cetificate and the secondary account have amply appreciated.

Whether or not I remove my name makes no difference. When the Bdate arrives, the Custodian's name is automatically removed - by Texas law - the 21 year old GChild is now an adult and the entire account is in their control.

Presently I have five accounts just like this one (5 GChildren) Each is designed the same way. I am receiving the 1099s and strangely I have included the 1099s on my 1040.

I plan now to just hand it over a hope the taxes will be paid out of proceeds(sp). On my side I wonder what the IRS may involve my situation - since the taxes were paid!

Anybody out there know how to untangle that knot?

Regards to all who have followed along!

Re: UGMA - minor/adult refuses to accept
Posted by: DeeDee, July 11, 2013 12:16AM
Did you include the 1099 income as nominee for the grandchild?

Re: UGMA - minor/adult refuses to accept
Posted by: Sven, July 11, 2013 01:37AM
Sounds like the other 4GC's are still minors. Are they? I hope things work out OK with your 21 year old now that you are back in contact. If these "accounts" are any kind of UGMA/UTMA accounts they are completed gifts, despite what you may have intended and the tax issues, if any, are going to have an impact on the GC's, or as minors, possibly the tax returns of their parents. Lots of this is how much investment income there is. So you are making progress and when the current situation is resolved I'd sure review the whole plan.

Re: UGMA - minor/adult refuses to accept
Posted by: Yellowstone, July 11, 2013 01:58AM
DeeDee- I do not know what you mean by 'nominee'. i am listed on the Certificate as the Custodian plus the designation: UGMA/Texas. The GChild is listed underneath my name.

Sven- Yes, the remaining 4 are minors - but rapidly rising! Three of the four are far more approachable and accessable.

Re: The taxes. I have a feeling that once they each receive the UGMA they will run into a few 'snags'; Broker fees, request to make copies of documents (birth certificate), proof of residence, etc. These things are the beginning - then they will have to handle the issue of Cost Basis, and finally taxes that were paid - but by me. (This issue I may have to burden - but feel IRS may owe me - but fat chance!).

Thanks for hanging in there with me . . .

Re: UGMA - minor/adult refuses to accept
Posted by: Sven, July 11, 2013 02:37AM
I doubt the IRS is losing sleep over the fact you seem to have been reporting move investment income than gets reported to your SSN. I also doubt they are looking to see why information reported to them by brokers under the SSN's of GC don't "match" up with income reported on tax returns filed using the SSN's of the GC's. They may not be required to file a return if the investment income is low enough per year. That's why a review of the overall situation would be a good thing to undertake. I would think given all of this you will do whatever for 2013 that needs to be done, and it may well let the cat out of the bag. Do the parents know of your generosity?

Re: UGMA - minor/adult refuses to accept
Posted by: Yellowstone, July 11, 2013 01:38PM
The answer to that question is - "Yes, sort of". None really know what or how much.

And since I don't know about the impending tax issue - they won't know that either.

RE: IRS. Ihope they spending their valuable time chasing Bernie Madoff!

REGARDS!

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 13, 2013 04:36PM
UTMAs are creatures of state law..they do not necessarily mesh with Federal tax law.

You are the custodian of the funds ..not the nominee.

it's nice if you cooperate with GC to get GCs taxes right ..but whether you have a legal duty to do so is not in the cards as I recall.
It seems prudent to me that the child's parent / guardian get any necessary tax information. Not nice or fun to have a secret account trigger an unnecessary tax problem

Financial institutes sometimes invent own rules ...Whether or not in Tx the transfer of control is automatic or takes a custodial step I didn't look up..you look it up..but expect intuitions to ask for more. If you have old style actual paper certificates some places my try to tack on some hefty fees to re register..be careful...Ive next paid a fee yet but needed a few sidesteps when dealing with paper certificates.

As an aside a UTMA could pose nasty financial aid problems if child is seeking need based aid.

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 13, 2013 04:42PM
many states including mine treat it as a done deal conveyance...a few others allow for a debate as to lack of donative intent.

If you are both sole custodian and the donor..be careful not to die before complete turnover...IRS unwraps the gift if you maintain control.

in general you cannot spell out rules for the gift..but on flip side you have near absolute control to spend in on child for things you think he needs up thru 21.

Day after he gets control..that's a new ball game ..and if kid seeks to blow it ..ouch!

Re: UGMA - minor/adult refuses to accept
Posted by: Drewremedy, July 13, 2013 04:50PM
I didn't think transfer was automatic..go read TX 141.021....it requires custodian to act to turn it over. ( Some custodians are reluctant to act and must be dragged to the point by order.) Not your problem as you post it.

But gone are the days under some prior UGMA laws where a kid of 18 and proof of age on back of a post card could simply walk into a bank or brokerage firm and unilaterally cash out the account.

Re: UGMA - minor/adult refuses to accept
Posted by: gejo48, July 27, 2013 04:21PM
I read quite a few posts here with the same question on my mind, which was eventually answered: Is this UTMA grandchild in college? Here's what everyone forgot to tell you:

If a child has a UTMA, the college counts that asset against him/her when calculating financial aid eligibility. ANY assets that are known to a student from January 1 of their junior year in high school up to their senior year of college must be reported to the college and will hurt their chances of "free" money (grants, scholarships, etc.), even if they have worked long and hard to deserve them.

You also mention that you have UTMA accounts for your other grandchildren as well. I'm sure you have good intentions, but what is your rush? All the paperwork is in order, so leave it alone. When they graduate from college, THEN contact them. They may have student loans to pay off, and they can use the money for that if necessary.

If you make them take the money before the start of their senior year of college, the colleges will claim that the grandchildren have plenty of assets to pay full price, and will make them take out loans when they might otherwise have been awarded the scholarships/grants they'd have received because of all their hard work. MANY colleges and scholarship foundations base even their MERIT awards on financial aid eligibility.

We know this from experience. You are unwittingly putting them in a very disadvantageous position. If you really care about your grandchildren having these funds available to them, STOP what you are doing and wait until each grandchild is at least in his/her senior year of college.



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