Education Planning, Education Trusts

UGMA/UTMA

The Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act established a simple way for parents to transfer stocks, bonds, mutual funds, annuities, real estate, fine art, patents, copyrights and life insurance policies to their children.

The parent establishes a custodian account and appoints a custodian (trustee). The parent then irrevocably donates the assets to the trust and the assets technically belong to the minor although controlled by the custodian until the minor reaches termination age (18 or 21). The custodian has the fiduciary responsibility to manage the assets in a prudent manner for the benefit of the minor. The income from the assets is taxable to the minor at their tax rate not the parents (significant tax savings).

Trusts/Irrevocable Trusts

A trust is a relationship whereby property (including real, tangible and intangible) is managed by one person/persons/organization for the benefit of another, or in this case, for the education of the beneficiary. A trust is created by a settlor/trustor/grantor/donor, who entrusts some or all of their property to people of their choice (the  trustee). The trustees hold legal title to the trust property, but they are obliged to hold the property for the benefit of one or more individuals or organizations (the benefiary), usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.

The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law.

An irrevocable trust is is a trust in which the terms of the trust cannot be amended or revised until the terms or purposes of the trust have been completed.

 

Dugan & Lopatka Financial Services, LLC104 E. Roosevelt Rd., Wheaton, Illinois 60187Phone: (630) 665-0914Fax: (630) 665-5030

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