The Texas Uniform Transfers to Minors Act (UTMA) permits a donor to make an irrevocable gift of any type of property to a minor by naming a custodian of the property and reciting in the transfer document that the transfer is to an adult individual to trust company “as custodian for [the minor] under the Texas Uniform Transfers to Minors Act.”
Custodian’s authority to invest. Although the custodial assets are indefeasibly vested in the minor, the custodian has all “rights, powers, duties and authority” over the assets. This authority is the same as the authority any “unmarried adult owners have over their own property.” In dealing with custodial property, the custodian must observe the standard of care that would be observed by a prudent person dealing with the property. However, the custodian must take care not to commingle funds or withdraw amounts for personal use. Also, the custodian must keep detailed and accurate records of all investments, deposits, payments and withdrawals.
Minors’ rights. UTMA grants minors aged 14 and older a great deal of authority over the custodial assets held for their benefit. For example, under UTMA, a 14-year-old can petition the court for removal of a custodian for cause. The custodian must make an accounting available to a 14-year-old beneficiary upon request and the 14-year-old beneficiary can personally petition the court to require the custodian to give an appropriate bond. When the beneficiary attains the age of 21 or dies, the custodian must transfer the assets to the beneficiary or the beneficiary’s estate.
Use of UTMA funds by custodian on behalf of minor. The custodian of an UTMA account may use “so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order.” When determining the appropriate uses of the UTMA funds under Texas law, the custodian does not need to consider any other resources available to support the minor. These provisions indicate a preference for liberally construing the custodian’s discretion to use the assets for the minor’s direct or indirect benefit.
On the basis of existing authority, a Texas custodian reasonably could use UTMA funds to pay for the following on behalf of a Texas minor:
- Private primary and secondary school
- All college expenses
- Travel
- Extra-curricular activities
- A vehicle for a minor who has attained driving age
- Car insurance, maintenance, and repairs
- Healthcare and dental expenses
