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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29941
Experience:  Taxes, Immigration, Labor Relations
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I have 2 utma accounts, each has a different beneficiary.

Customer Question

I have 2 utma accounts, each has a different beneficiary. Can I move the assets from one account to the other and thereby close one of the accounts?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Generally - yes - that is possible - but you should be aware of possible legal and tax consequences.

First of all when you wrote "I have 2 utma accounts" - that sounds as you own these accounts - and that is not true...

If you were having a regular bank or investment account and mane a beneficiary of that account that would be correct - you own that account.

With the UTMA account - the person whom you named as a beneficiary is the LEGAL owner of that account - you do not own the money or investment assets in that account - you are not an owner - but a custodial who manages that account on behalf of the minor owner until he/she reaches the age of majority.
When assets are transferred to the UTMA account - that was a GIFT to the minor - and you cannot simply take it back or treat as your own assets.

As the custodial - you have legal obligations to act in the best interest of the minor. A custodial account is used to hold and protect assets for a minor until they reach the age of majority. If you use assets in the UTMA account for other purposes - that might be a violation of your custodial obligations.

Expert:  Lev replied 1 year ago.

So when assets are transferred from one UTMA account to another - that means a change of the ownership.
Thus if the first account holds some investment assets - these assets should be sold - and that will trigger tax obligations for the owner (who is a minor - not you) if these are appreciated assets.
In additional change the ownership without consideration woudl generally classified as a gift - from one minor to another minor. So depending on the amount - the donor might be required to file a gift tax return.

Please also be aware that the decision to make a gift is made by you - and that fact might be questionable if that is in the best interest of the minor.

Expert:  Lev replied 1 year ago.

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