Source: https://www.wolfbaldwin.com/Estate-Planning-Articles/PA-Uniform-Transfers-to-Minors-Act.shtml
Timestamp: 2019-04-20 09:05:45+00:00

Document:
Many people believe that minors cannot “own” property. A more correct legal description of this predicament is to say that children can own property, but cannot exercise their rights in property until they reach the age of majority. The law often splits title to property into legal title and equitable title. Instead of trying to cram a full law school course in property law into a few sentences, suffice it to say that equitable ownership entails the right to benefit from property, and legal title is the right to exercise control over it. Minors may well have equitable title to many kinds of property without the legal right to sell, mortgage, or pledge that property. If some kind of formal trust arrangement is not set up for an adult to exercise control over property which a minor might “own,” the Pennsylvania Uniform Transfers to Minors Act will generally apply. This is good for people who want to give gifts or transfer property to minors without going through the expense and formality of setting up a formal trust, and without the rigors of too much court oversight.
The Pennsylvania Uniform Transfers to Minors Act (sometimes known as PAUTMA or UTMA, or, formerly, as the Pennsylvania Uniform Gifts to Minors Act, or PUGMA) can be found at 20 Pa.C.S.A. § 5301, et seq.. In the definitions section of the act, a “minor” is actually defined as “an individual who has not attained 21 years of age,” with certain exceptions. The person to whom the transfer is made is called the custodian. A person can transfer property to a custodian to be held on behalf of a minor by will, trust, or gift.
An interest in any other type of property as long as the words above are used and the custodian acknowledges receipt of the custodial property.
As holder of legal title to the custodial property, the custodian has the power to collect, hold, manage, invest, and reinvest the property. The custodian can exercise any right that the custodian might have over his or her own property, except that the value of the property can only be used for the benefit of the minor to whom the property was given. However, in dealing with custodial property, a custodian must observe the standard of care that would be observed by a prudent person dealing with property of another. 20 Pa.C.S.A. § 5312. In other words, a custodian would be well advised not to invest all of a minor’s property in junk bonds or a speculative start-up venture.
One of the primary goals of the Uniform Transfers to Minors Act is to give custodians the ability to use property for a minor’s benefit without a court order. Thus, “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: (1) the duty or ability of the custodian personally or of any other person to support the minor; or (2) any other income or property of the minor which may be applicable or available for that purpose. 20 Pa.C.S.A. § 5314.
As much as the PAUTMA is designed to provide flexibility and ease in administering the property of minors, the process is not completely without oversight. The custodian must keep records of all transactions with respect to custodial property, including information necessary for the preparation of the minor’s tax returns, and must make those records available for inspection by a parent or legal representative of the minor or by the minor if the minor has attained 14 years of age. 20 Pa.C.S.A. § 5312. The custodian will be wise to keep accurate records, because he or she may be called upon by the court to make a full accounting of any and all actions taken by the custodian with respect to the custodial property. In most cases, the custodian must transfer the custodial property to the minor when the minor reaches age 21. 20 Pa.C.S.A. § 5320. Until that time, the custodian may be reimbursed for reasonable expenses incurred in performing his or her duties. 20 Pa.C.S.A. § 5315.
In sum, the Pennsylvania Uniform Transfers to Minors Act is a powerful tool for those who want to make sure that a minor has the right to enjoy the benefit of real or personal property, without the rigamarole of a formal trust. It has many uses as part of an effective estate plan. However, there are a few notable downsides to transferring property to a custodian under the PAUTMA, not the least of which are that the transferor grants wide discretion to the custodian to spend the assets as he or she sees fit, and the assets so titled may be counted as available to the child for the purpose of determining the child’s entitlement to college aid. To learn more about the PAUTMA, or its uses in relation to your own needs, talk to your estate planning lawyer. He or she may recommend the PAUTMA as an option you had not considered.
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References: § 5301
 § 5312
 § 5314
 § 5312
 § 5320
 § 5315