Avoiding Probate for Custodial Accounts

To save taxes and make gifts to children, grandchildren, nieces or nephews, many people have created custodial accounts. These accounts are commonly known by their initials UGTMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act). They can be relatively low cost ways to make gifts to minors and good for tax planning.

But without good planning they can create problems in the future. The problems arise if you have not named a successor custodian. Without a successor custodian, upon your death or disability, a probate case would need to be filed before any money could be distributed.

Since these accounts are typically funded with relatively modest amounts, having to later file a probate case would be relatively costly.

Two ways to avoid this problem are:

1) name successor custodians for each of the accounts or

2) make a global designation of successor custodian for all custodial accounts in your Living (Revocable) Trust or Will.

This is another example were proper planning can avoid costly expenses.


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