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Message #665 Gifts to minors

mp3 #665 Gifts for Minors (mp3 file)

If you have ever wanted to make a gift of stock, bonds, other securities or cash to a minor--that is a person under the age of 18 in California and some states, or under the age of 21 in other states--you may have wondered if a minor can own such property? You may have wondered if a minor has the right to control his own such property without help from an adult.

If you give stocks or bonds or other securities to a minor, the stock or security must be held in your name or the name of some other person or company as custodian, guardian, or trustee for the minor. When a custodianship is used, the actual words of the registration would be "Joe Jones as custodian for Bob Jones under the California uniform transfers to minors act." Those words sound confusing and unnecessary but they are required by the law to avoid confusion and to protect the minor. If you do not wish to register the securities, you may simply execute a written statement of gift. That statement must be worded exactly as the law requires.

The gift of money in a bank must be registered in the same way.

Only one person can be the custodian of the minor's property. This rule avoids confusion and arguments.

A gift to a minor which is made in these ways can never be taken back. It is irrevocable. To any extent that tax benefits are desired from such gifts, there are dangers in having the giver of the gift or the parent of the minor be the custodian or trustee.

The custodian of the minor's property must use it for the support and education of the minor to the extent the custodian deems advisable. If the custodian does not use the property for the child, the child may ask a court to order the custodian to use as much of it as is necessary for his support or education.

When the minor becomes an adult--that is, attains age 18, in California--the custodian must give the new adult his property. The same is true for guardians; however, a trust initially established for a minor may continue longer if written that way.

The custodian has a duty to invest the minor's property wisely. Certain investments which are not wise must be avoided, especially investments which are risky. A custodian must also keep detailed and accurate records of all investments and income and expenses.

A custodian of a minor's property is entitled to reimbursement for his expenses from the minor's property but he does not have to take the money for his expenses. The custodian may also be paid for his time and services. Strict rules must be followed in order for a custodian to receive such compensation.

A custodian may designate another person to succeed him if he should resign or die or become incapacitated.

As you can see, the law tries to protect young people from loss of their property and from unscrupulous people. The laws are very technical and they are designed to cover every possible situation. You may find some of the laws about gifts from minors in the California Probate Code Sections 3900 through 3923.

Before making a gift of real property to a minor, you should be aware that there are legal consequences which are not discussed in this message.

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