JOINT FAVORABLE REPORT
AN ACT CONCERNING THE CONNECTICUT UNIFORM TRANSFERS TO MINORS ACT.
Joint Favorable Substitute
SPONSORS OF BILL:
Connecticut Bar Association
REASONS FOR BILL:
Under the current statute, the custodian who is in charge of the money up until the age of 21 has no choice but to turn over the funds. In the present law, there is no mechanism for the beneficiary to set up a trust so the child does not receive the custodial account at the age of 21.
Will allow a 30 day window for the child to say yes they want the account now and not for it to be transferred into a trust fund and, after the 30 days are up, the child loses their right.
RESPONSE FROM ADMINISTRATION/AGENCY:
NATURE AND SOURCES OF SUPPORT:
Attorney Peter Mott, Connecticut Bar Association-This bill would amend the Connecticut Uniform Transfers to Minors Act (UTMA). That Act allows a person to transfer property, during lifetime or at death, to a custodian for the benefit of a minor (a person under age 21). The custodian manages the property for the minor, who is the owner of the property, and may make distributions to or for the benefit of the minor. When the minor turns 21, the custodian is required to transfer the custodial property to the now-adult owner.
While some 21 year olds are responsible, others are not, and most have little or no experience handling substantial assets. In many cases, it is not in the newly minted adult owner's best interests to receive the custodial property at age 21. Under the UTMA, the custodian has no choice.
The bill ameliorates the problem by amending the UTMA to permit the transfer of custodial
property to a trust established for the minor's benefit known as a "2503(c)" trust, which is
authorized by Section 2503(c) of the Internal Revenue Code. The custodian is so authorized
whether or not the instrument creating the custodial property expressly authorizes the custodian to transfer the property to the 2503(c) trust. This provides a reasonable alternative to mandatory distribution at the age of 21.
A Section 2503(c) trust, as with a custodial account, must be created for the sole benefit of a beneficiary during his or her lifetime. Upon attaining the age of 21, the beneficiary either must
be given all of the trust's accumulated income and principal, or must be given the unrestricted
right to withdraw the assets of the trust for a reasonable period of time (typically 30 days). If the assets are not withdrawn within the applicable period of time, the beneficiary's right of withdrawal lapses and the assets remain in the trust until the age specified in the trust instrument. After the right of withdrawal lapses, the beneficiary will continue to benefit from the trust assets because the trustee typically will be authorized to make discretionary payments to or for the benefit of the beneficiary from the income and principal of the trust for his or her health, education, and other purposes. The beneficiary also can be given a general testamentary power of appointment providing him or her with the ability to appoint the trust assets to whomever he or she desires upon death.
The change would apply to all existing custodial accounts, as well as future ones. The following states have already amended their UTMA's in a similar manner: Illinois, Florida, Maryland, Arizona, Colorado, Kansas, Missouri, Nevada, New Mexico, and Ohio.
Thank you again for this opportunity to comment on this bill
NATURE AND SOURCES OF OPPOSITION:
Reported by: Sarah E. Kolb