4.2 UTMA Accounts

UTMA Accounts.   A Uniform Transfers to Minors Act account is formed pursuant to Maryland statute.   Generally, a custodian holds funds for the benefit of a child and any funds not used for the child before he or she reach 21 years of age must be distributed to the child when he or she reaches 21.   Because of this constraint, UTMA accounts are generally used for sums that will probably be consumed for items benefitting the child before they reach 21 years of age or, alternatively, where the parent is satisfied that it would be appropriate for the child to receive any remaining balance at 21 years of age.   The great strength of UTMA accounts is their simplicity:   the will or trust merely instructs the fiduciary to set up a UTMA account for the benefit of the child and the will or trust either permits the fiduciary to name a custodian or the estate planning document names the custodian.   The mechanics of how the fund is to be managed is contained in the statute, not in the planning document.