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What is a CUTMA account?

Some important aspects of estate planning are done outside of "traditional" estate planning documents like wills and trusts. One of these involves something called the Uniform Transfers to Minors Act (UTMA). Each state has its own UTMA. In California, it's called the California Uniform Transfers to Minors Act (CUTMA).

You can establish a CUTMA account at most financial institutions in the state. It allows you to gift some of your assets to a young family member. The money in the account legally belongs to the child, but a designated custodian is able to transfer assets to the account for the child. Although the custodian has access to the account, the assets in it must be used for the minor's benefit only. Income earned on the funds in the account is reported under the minor's Social Security number.

The child can't access the assets until they turn 18. (In some cases, you may be able to delay access until they're older.) At that time, the custodian is required to close the account, terminate the custodianship and transfer the assets to the minor.

If you want to use a CUTMA to set aside money for your child, grandchild or another minor, you must establish a separate account for each one. Each account is allowed only one custodian. However, you can name a successor custodian if you choose.

There are many options for setting aside money for a child while you're still alive while still ensuring that they don't have access to it until they're adults. A CUTMA account is just one of them. If you're considering a CUTMA account, it's wise to consult an experienced estate planning attorney to help determine the pros and cons of all of your available options and decide which is best for you and the child.

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