Common to many areas in the United States of America, the Uniform Gift to Minors Act is a set of laws that help to protect the financial well being of minor children. In essence, the act provides standards and provisions for the responsible management of any assets that are assigned to a minor child. These assets can include any intangible gifts bestowed upon the child by relatives or other entities. The act serves as a means of ensuring the assets are cared for and utilized to benefit the minor child until he or she reaches adulthood and is capable of managing the assets personally.
In general, the various state level incarnations of the Uniform Gift to Minors Act, or UGMA, will establish a custodian who is charged for managing and overseeing the assets for the minor. The custodian may be a parent or other relative, or any individual that is assigned the status of a legal guardian. An attorney may also function as the custodian, if that is the wishes of the individual or entity that extends the gift to the child. The individual directing the custodial account may not utilize the assets of the minor child for personal gain, although most states allow the assets to be utilized to meet current and real needs of the child.
While serving as a custodian, the individual is usually granted broad managerial powers under the terms of the Uniform Gift to Minors Act. The custodian may sell assets, as long as the proceeds are used to benefit the child in some manner. This may involve proving essentials such as food, clothing, and shelter for the minor, or handling tuition and fees at a private school. At the same time, the provisions of the Uniform Gift to Minors Act allow the custodian to manage such assets as stocks and bonds with an eye toward growing the investments on behalf of the minor child.
In many states today, the earlier provisions of the Uniform Gift to Minors Act have been superseded by a newer set of laws that are known as the Uniform Transfer to Minors Act. However, there are a number of states that continue to function with the use of the UGMA.
