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Making Gifts to Minors

Things You Should Consider

Creating a Custodianship Account under the Illinois Uniform Transfers to Minors Act provides a useful, but often overlooked, tool for the management of assets for minors. Instead of asking court to appoint a guardian or creating a trust, individuals can transfer almost any kind of property interest to a minor by creating a custodianship under the Illinois UTMA.


The Uniform Transfers to Minors Act (UTMA) provides a simple, inexpensive method of transferring property to minors and to promote uniformity among state laws.

Using the Illinois UTMA

A donor creates a custodianship by causing property to be transferred to or registered in the name of an adult or bank or trust company "as custodian for (name of minor) under the Illinois Uniform Transfers to Minors Act."

The transfer can involve a wide range of property interests. The Illinois UTMA specifically provides for the following to be transferred to a custodian: certificated or uncertificated securities; money paid or delivered to a broker or financial institution for credit to an account held for the minor; a life or endowment insurance policy or annuity contract; property subject to a power of appointment; an interest in real estate; tangible personal property created by a certificate of title; and a beneficial interest in a land trust.

The Illinois UTMA also includes a "catch-all" category, allowing an interest in any property not otherwise described in the specified categories to be the subject of a transfer to a custodian.

Along with applying to almost any type of property interest, the Illinois UTMA creates a statutory presumption that any trust, will, benefit plan, insurance policy, or any other governing instrument authorizes payment to a custodian. This means that documents no longer need to expressly authorize distribution to a custodian and that any payment to be made to a minor pursuant to a written document may be made to a custodian for the minor's benefit.

The Illinois UTMA prohibits transfers to a custodian in only a few cases. These include when the governing instrument expressly prohibits transfer to a custodian or when such a transfer is inconsistent with the provisions of the will, trust, or governing instrument.

Custodianships under the Illinois UTMA terminate at age 21 rather than at age 18. The UTMA drafters believed that most donors would prefer to have the property under management for the minor as long as possible. Despite the fact that Illinois has made 18 the age of majority, the custodianship will continue until the minor reaches the age of 21.

Also, custodians who are not compensated for services will not be liable for losses to custodial property unless the losses result from bad faith, intentional wrongdoing, or gross negligence from failure to maintain a standard of prudence in investing the custodial property. This protection applies because Illinois found that many custodianships are imposed on friends who agree to serve out of courtesy or for convenience, and not because the custodian has any special skills or expertise.

Finally, the Illinois UTMA validates transfers made before the effective date of the act except to the extent that such retroactivity would impair vested rights. This retroactivity applies to any property previously transferred to a custodian, whether the property fit the definition of "custodial property" under the old UGMA or the new UTMA.

Real Estate Transfers

The Illinois UTMA offers some increased flexibility to the real estate practitioner. The old UGMA did not permit real estate located outside Illinois to be transferred to a custodianship. The Illinois UTMA does away with this prohibition but does require that, at the time of the transfer of any real estate, either the transferor, the minor, or the custodian be a resident of Illinois or that the custodial real property be located in the state where the act is being used.

The original UTMA also requires recording of a real estate title document of transfer, Illinois amended this section to provide that the transfer of real estate or "an interest therein," will be effective upon recording of the deed, assignment, or conveyance instrument or, as under the UGMA, upon delivery to and acknowledgment by the custodian.

In addition, the Illinois UTMA specifically includes a beneficial interest in a land trust as a property interest that can be transferred to a custodian for the benefit of a minor. The original UTMA does not include this specific treatment of land trusts, although an interest in a land trust would likely fall under the catch-all category in the act. By specifically including land trusts, the Illinois UTMA eliminates any possible confusion on this point.

Finally, the Illinois UTMA makes clear that no do documentation is necessary to convey real property upon termination of the custodianship.


Custodianship under the Illinois UTMA are easy to use and offer many advantages. For instance, a donor can easily transfer property to a minor, but the minor will have a difficult time reconveying this same property during his or her minority because of the minor's legal disability. Often, a court will have to issue an order before a minor's interest in real estate can be sold. If a minor's property is conveyed instead to a custodian, such problems can be avoided.

In addition to limiting or eliminating court costs, the administration of custodianships will remain private unless an accounting suit is brought. Given these advantages, custodianships under the Illinois UTMA should become the preferred way of holding and transferring property for minors.

The firm of Bellas & Wachowski Attorneys at Law can help you make the necessary estate planning decisions in a cost-effective manner. Contact Attorney Tracy Ries at tracy@bellas-wachowski.com 847.823.9030 x221 for more information.