Tag Archives: cutma

Annual Gifts: $14,000 each to as many people as you’d like

Dear Liza: If my mom gifts $14,000 to me and my 5 children and does this by writing each individual separate checks for $14,000 which are then deposited in each separate child’s account, will it also be deemed a gift to me if I am a joint owner? Probably not. Your mom can give up to $14,000, per year, to you, each of your five children, and everyone who lives in Miami, if she’d like to. As long as none of these gifts exceeds that annual gift limit (currently $14,000), she doesn’t need to report this on a gift tax return. However, since these gifts are to be deposited into joint accounts and you are a co-owner, make sure NOT to withdraw money from these accounts for your own use. If you withdraw money from these accounts for your own use, it could be considered a deemed gift from your mother to you–and, since you’ve already received a gift of $14,000, that extra gift would need to be reported. Your mother wouldn’t owe any gift tax on that gift, she’d just use up some of her $5,450,000 lifetime exclusion from the tax, but it would still be an extra return to prepare and file.

Better yet, why not just open up custodial accounts for each of the kids, and put these annual gifts in those accounts? You can be the custodian for each account and use the money for your children’s benefit without any concern about a withdrawal being deemed a gift from your mother to you.

How long can custodial accounts last?

Stock PhotoDear Liza: If I’d like to designate my young child as beneficiary on a retirement account and bank account by naming a custodian under CUTMA, how do I specify that I want the custodial account(s) to last until my child is 25? Naming a custodian under CUTMA (which stands for California Uniform Transfers to Minors Act) for a gift to a child under the age of eighteen is an excellent idea. If you don’t, and you just name a minor directly as a beneficiary, and if the gift is more than $5,000, a guardian of the estate will have to be named by a court before the financial institution will release the funds.

But, clearly, you already know this, or you wouldn’t have asked! And you also know that a CUTMA account can last longer than age 18. In California, where I’m licensed to practice, the longest you can make a CUTMA account last for a gift made during your lifetime is 21. A CUTMA account can last to age 25 only for gifts made in a Will or a trust, or on a beneficiary designation that applies after death.

The way you’d do this is to write down: “________(THE ADULT), as custodian for ________(THE MINOR) until age 25 under the California Uniform Transfers to Minors Act” on the beneficiary form.

All states except Vermont and South Carolina have adopted the Uniform Transfers to Minors Act law, which allows you to name a custodian for a minor’s property. Some states terminate such accounts at 18, most terminate at 21, and some, like California, allow them to last to age 25 in certain circumstances. Here’s a link to a guide to all of the states that have adopted this law and the age limits applicable in each state.