A Florida UTMA account is a savings vehicle for minors, established under the Uniform Transfers to Minors Act. It allows adults to transfer assets to a child, with the funds managed by a custodian until the child reaches adulthood, typically offering tax benefits and control over when the child accesses the money.

It provides a convenient way for individuals to gift or transfer assets to minors without the need for a formal trust.

Florida UTMA accounts can hold a variety of assets, including cash, real estate, and securities, under the stewardship of a custodian until the minor reaches a specified age.

Florida UTMA, ITF Accounts, and Gifts

Key Features of Florida UTMA Accounts

  1. Custodianship: An adult, typically a parent or relative, acts as the custodian of the UTMA account, managing the assets on behalf of the minor until they reach the age of majority specified in the UTMA, which can be up to 25 years in Florida, though the standard age is 21.
  2. Flexibility in Assets: UTMA accounts in Florida can contain a wide range of assets, not just cash and stocks. They can include life insurance policies, annuities, real estate, and other forms of property.
  3. Tax Benefits: While not tax-exempt, UTMA accounts offer some tax advantages. The first $1,100 of unearned income in an UTMA account is generally tax-free for the minor, and the next $1,100 is taxed at the child’s tax rate, which is typically lower than adult rates.
  4. Simplicity: Setting up an UTMA account is typically simpler and less costly than establishing a trust. It does not require the ongoing management and administrative duties associated with more complex trusts.

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How Do Florida UTMA Accounts Work?

Money in a Florida UTMA account is considered property of the minor child, not an asset owned by the custodian parent or grandparent. A judgment against the custodial parent may not be satisfied from the child’s assets in the custodial account.

A judgment creditor’s writ of garnishment served upon a bank should not affect money held in the name of the judgment debtor’s properly titled custodial account. The creation and funding of a Florida UTMA account may be challenged as a fraudulent transfer if it is shown to be primarily intended to protect money from the parent’s creditor.

Florida UTMA, or FUTMA, accounts are sometimes confused with other types of financial accounts established for the benefit of a minor child, namely “ITF,” “POD,” or “TOD” accounts. An ITF account refers to an account at a bank or other financial institution where the owner has title to the money or other assets in trust for another person.

A “pay on death” (POD) account or a “transfer on death” (TOD) account directs that the money is to be transferred to a named beneficiary upon the death of the account owner. ITF, POD, and TOD, accounts have the same effect and accomplish the same goal. The money is paid to named beneficiaries upon the owner’s death.  These accounts are efficient estate planning tools because they transfer assets to beneficiaries without the necessity of a probate proceeding.

Considerations for Setting Up a Florida UTMA Account

  • Choosing a Custodian: Carefully consider who will manage the account, as this person will have control over the assets until the minor reaches adulthood.
  • Specifying Termination Age: While the default age of termination is 21 in Florida, it can be extended to 25. Decide at what age the minor should receive the assets.
  • Impact on Financial Aid: Assets in an UTMA account are considered the property of the minor and can affect eligibility for financial aid for college.

Asset Protection for ITF, POD, and TOD Accounts

ITF, POD, and TOD accounts do not provide any asset protection for the lifetime owner. Money in these accounts belongs to the owner during the owner’s lifetime, and the owner has the right to withdraw money from the account during their lifetime. Just as the owner has complete access to the money, a creditor of the owner can also get the funds to collect a judgment.

A judgment creditor may garnish money held in an ITF, TOD, or POD account to execute a judgment against the owner during the owner’s lifetime. A creditor of the designated beneficiary or heir shown on the account title may not garnish the account during the owner’s lifetime because the money does not yet belong to the designated beneficiary or heir, and the owner may amend the death beneficiary.