Installment Loans

From $200 - $2,000*
Simple and Fast

Deciding on the Best Asset Gift for Minors?

May 24, 2018 | By Louis Tully

We all should want to help future generations succeed in life. Whether you’re a parent, a grandparent, a godparent or an aunt or uncle, you want to ensure the next generation in your family will never have to struggle financially or need emergency products like an installment loan when money gets tight. If you’re in a position where you can offer your children something that could give them a head-start in life, you should carefully consider how to go about gifting it to them. Whether you’re considering transferring your assets under the Uniform Transfers to Minors Act (UTMA) or managing their disbursement through a trust fund, you should carefully examine the advantages and disadvantages of each. Here is a closer look at the main differences between a UTMA and a trust fund:

The Uniform Transfers to Minors Act (UTMA)

The UTMA is a specific type of legal arrangement that allows an owner of a valuable asset (predominately a property) to transfer their ownership over to a minor. Once the transfer has been made official, it cannot be undone. However, the minor being granted ownership of the asset cannot access or manage it in any way until they’ve reached the legal age as set forth by the state they reside in. In the meantime, the minor’s property is temporarily held under the name of the minor’s parent or legal guardian. To establish this kind of asset transfer, a UTMA custodial account is opened through a brokerage firm.

Trust Fund

Trust funds work a little differently than a UTMA. A trust fund allows the grantor (original owner of the property) to write up a legal contract known as a trust instrument, which lists a set of terms and conditions of how the property will be managed once they’re deceased. The individual the granter decides to hand their property over to after they’ve passed away is referred to as the beneficiary. The major benefit of going the trust fund route is that the individual leaving their property still has full control over their assets until death and even afterward, as the grantor decides how their assets are managed and the conditions that must be met before being transferred to the beneficiary.

Before making the important decision of how you want to go about passing on your assets to your loved ones, take the time to do a little a research and see which of these two options works best for you and your individual circumstances. It is also important to bear in mind that gifting your your wealth to loved ones may come with the best of intentions, passing on the good habits and financial lessons that helped you accumulate your fortune in the first place is invaluable. Teach your family about money and how it should be earned, revered and appreciated. Be sure that they understand that good fortune doesn’t come from gifts, but dedication and hard work.