Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Donation from UTMA
Posted by: 47Percent, September 30, 2017 03:33PM


Is it okay for a custodian to give a small (<$100) donation to a charitable org the beneficiary participates in. I know the fees and such are perfectly fine -- but how about a totally voluntary donation.

Is it okay to treat it as a charitable deduction in the child's tax form. I have not checked if there is a provision as such -- but assuming there is.

Re: Donation from UTMA
Posted by: Spirit Rider, October 1, 2017 01:07AM
You are not going to find a specific provision on this. There is no UTMA police and there are a lot of gray areas on UTMA distributions.

The first question to be asked; "is this UTMA distribution for the minor's benefit?" The next question is what constitutes a benefit. Is it only for the purchase of goods, services and experiences? Personally, I could see justification that a donation to a charitable cause of choice of the minor, enhances their health, welfare and sense of community.

However, the real nub, does this truly benefit the minor? What is your personal relationship with the minor? Are they your child, grandchild, etc...?

Children have a great need to please adults in their life that are important to them. Is this really their free will or is it something they "think" will please you?

I would consider the following issues. Is this a charity that you have donated to or is this a charity that the minor chose totally separate from yours? Have you made it such a part of your family's teachings that this feels like an expected action by the minor?

My position would be, if this is anything but a spontaneous desire on the part of the child, this donation should be made out of your funds in their interest.

Re: Donation from UTMA
Posted by: Drewremedy, October 1, 2017 07:22PM
I doubt $100 raises an eyebrow anywhere

And unless child has taxable income and files a tax return and itemizes deductions , I don't think child gets a useful deduction for tax purposes .

Re: Donation from UTMA
Posted by: Sven, October 2, 2017 03:16PM
What could be more beneficial to a child than being taught the importance of charity? The lesson would really stick if the child was given cash and made the donation him or herself.

Re: Donation from UTMA
Posted by: 47Percent, October 2, 2017 07:56PM


Thanks all.

The child (10 years) attends a culture/language class taught by a 501(c) cultural org (completely non-religious). They charge a very small fee just to cover the study materials, but request a still modest, completely voluntary, donation once or twice a year. It is completely reasonable to conclude this is part of the tuition/fees. Hence my question.

I have seen the usual, "there is no UTMA police" etc., etc. in this forum. The amount is so small as to not make any difference either way.

My questions was more out of curiosity to check if there is a blanket ban on charity giving from UTMA as that is something that can be a) abused, and b) hard to prove/disprove one way or the other whether it benefits the child. Also, it is not unreasonable to conclude a child with no agency cannot donate his future inheritance.

Looking at the responses, it looks like that door hasn't been nailed shut, at least so far.

Re: Donation from UTMA
Posted by: Sven, October 2, 2017 09:26PM
If a 10 year old earns $10 from running a lemonade stand in his or her front yard, assuming local ordinances do not prohibit that, and decides to give the profit to a local animal shelter, I doubt there would be much debate, except among purists, as to whether the child has the capacity to understand what her or she did. Maybe I do not understand the agency concept. Out of curiosity, what's that all about?

Re: Donation from UTMA
Posted by: 47Percent, October 2, 2017 11:35PM

If the child has the cash in its possession, as in your lemonade stand scenario, and decides to give it away, that's one thing.

I would think it is not quite the same if the money is sitting in a bank account in a custodial account when the child cannot directly or indirectly operate that account or be even aware that such an account exists. That's what I meant when I said the child didn't have agency. The "agency" is with the custodian by definition, and custodian obviously has the fiduciary responsibility for that account.

My question was whether such donation to a cause could be interpreted to fall within that fiduciary responsibilities, that's all.

I was just trying to understand the guidelines.. not trying to pull a fast one ;-)

Re: Donation from UTMA
Posted by: Spirit Rider, October 3, 2017 02:42AM
The key point is that there really are very few guidelines. Here is relevant section of the model UTMA act from the Uniform Law Commission. Some states may have done some minor tinkering. There is precious little additional precedence.

As you can see, there is almost nothing that clarifies what is allowed and what isn't. You can check what the exact language of your state's section 14 is and what if any material precedence exists. I pretty much guarantee there is no even remotely related precedence.

On your honor so to speak.

SECTION 14. USE OF CUSTODIAL PROPERTY.

(a) A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to

(i) the duty or ability of the custodian personally or of any other person to support the minor, or
(ii) any other income or property of the minor which may be applicable or available for that purpose.

(b) On petition of an interested person or the minor if the minor has attained the 26 age of 14 years, the court may order the custodian to deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the court considers advisable for the use and benefit of the minor.

(c) A delivery, payment, or expenditure under this section is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor.



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