Clients often want to leave a gift to a minor—a person who has not turned eighteen. Under Massachusetts law, a minor may not receive property or money from a personal representative or trustee. Fortunately, there is a manner for providing funds to minors under M.G.L. 201A, Uniform Transfers to Minors Act.
If a person wishes to name a minor in a will as a devisee or in a trust as a beneficiary, their attorney should carefully consider how this transfer will occur. The Uniform Transfers to Minors Act (often abbreviated as “UTMA”) allows the testator or settlor to name a custodian who shall hold the property on behalf of the minor until they turn eighteen. A testator or settlor may require the custodian to hold the property until the minor turns twenty-one. The will or trust should identify the proper custodian. See M.G.L. 201A §3. If the testator or settlor fails to nominate a custodian, the nominee dies prior to acceptance of the property, or the nominee refuses to serve, then the personal representative or trustee may nominate a a custodian. See M.G.L. 201A §5.
A “custodian shall: (1) take control of custodial property; (2) register or record title to custodial property if appropriate; and (3) collect, hold, manage, invest, and reinvest custodial property.” M.G.L. 201A §12(a). Further, “In dealing with custodial property, a custodian shall observe the standard of care that would be observed by a prudent person dealing with property of another and is not limited by any other statute restricting investments by fiduciaries. M.G.L. 201A §12(b).
Here are some examples:
John wants to include a gift of $10,000.00 in his will to his niece Mary. Mary is fourteen years old. John wants to be sure that Mary’s mother is custodian since Mary's parents are divorced and her father is not well suited to handle money. John may include the following language in his will: “I bequeath the sum of $10,000.00 to Joan Quitecontrary as custodian for Mary Quitecontrary under the Massachusetts Uniform Transfers to Minors Act.” If John simply named Mary in his will, his personal representative would be permitted to name a custodian at his or her discretion.
John wants to name Mary as beneficiary of his life insurance policy. On her designation of beneficiary form, John should include: “Joan Quitecontrary as custodian for Mary Quitecontrary under the Massachusetts Transfers to Minors Act.” In the absence of such a designation, Joan would need to provide the life insurance company with proof of guardianship. If Joan and her ex husband are unable to agree, a petition with the Probate and Family Court may be necessary to establish guardianship for purposes of establishing a custodian of the funds from the life insurance policy.
It is important to carefully consider any gift of beneficiary designation if it involves a transfer to a person who is not yet eighteen. For more information, contact attorney Benjamin Cote at (781) 319-1900.