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Gifts to minors may be made pursuant to the Arizona Uniform Transfers to Minors Act. The Act makes gift-giving to minors relatively easy and inexpensive. Here we discuss the process of giving gifts to minors under the Act.
A gift to a minor may consist of stock, money, ownership of a life insurance policy or annuity contract, a right to future payments under a contract, an interest in real estate, or a certificate of title to a vehicle. The list is not inclusive, in that an interest in virtually any property may be transferred to a minor under the Act.
The process to transfer property to a minor is fairly simple. The person making the gift appoints an adult (over 21 years of age) or a trust company, as custodian for the minor. The custodian then takes control of the property until the minor attains the age of 18 or 21 years (depending on the manner by which the gift was made), or the minor dies. A gift may also be made pursuant to a person’s will or trust, or, under certain circumstances, by a person’s personal representative or trustee.
The following language must generally be used in connection with the transfer of any property to a custodian: “as custodian for ___________________ (name of minor) under the Arizona Uniform Transfer to Minors Act.” The transfer requirements for different kinds of property are set forth in the statute, A.R.S. Section 14-7659, which should be consulted prior to any property transfer. (A copy of the statute may be obtained online from the Arizona State Legislature’s website, www.azleg.gov.)
Duties of Custodian
A custodian must take control of the minor’s property, register or record title to it if appropriate, and collect, hold, manage, invest and reinvest the property. In dealing with the property (which is referred to as the “custodial property”), a custodian must observe the standard of care that would be observed by a “prudent person” dealing with property of another. If a custodian has a special skill or expertise, he must use it.
A custodian must keep the custodial property separate from all other property, sufficient to identify it clearly as custodial property of the minor. The custodian must also keep records of all transactions with respect to the custodial property. The records must be made available to a parent of the minor, or to the minor if he is at least 14 years of age.
Use of Custodial Property; Custodian’s Expenses
A custodian may deliver or pay to the minor, or expend for the minor’s benefit, as much of the custodial property as the custodian considers advisable for the minor’s use and benefit.
A custodian is entitled to reimbursement from the custodial property for reasonable expenses incurred in the performance of his duties.
A person who is nominated to be a custodian may decline to serve. A custodian at any time may designate a trust company or an adult (other than the person who made the gift) as “successor custodian.”
A custodian may resign at any time by delivering written notice to the minor (if he is at least 14 years of age) and to the successor custodian. The resigning custodian must deliver the custodial property to the successor custodian. If a custodian dies or becomes incapacitated without having designated a successor, the Act contains rules for the appointment of a successor.
Making gifts to minors is an important part of many estate plans. Whenever possible, the gifts should be made pursuant to the Arizona Uniform Transfers to Minors Act, discussed above.
The above article is an excerpt from Estate Planning in Arizona: What You Need to Know, 2nd Edition (Wheatmark, 2019), by Donald A. Loose, republished with the author’s permission.
Disclaimer: Laws change constantly. Specific legal advice should be obtained regarding any legal matter. The information contained on this website does not constitute legal advice and no attorney-client relationship is created.
Don likes to target shoot, scuba dive, and pilot airplanes. Most recently, he has been working on his golf handicap. Don enjoys writing, reading, and spending time with his wife, twin sons, and golden retriever, Lucy.