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What are the rules for a utma account. California. Can i pay…

What are the rules...

What are the rules for a utma account

Accountant's Assistant: Because laws vary from place to place, can you tell me what state this is in?

california

Accountant's Assistant: Has anything been filed or reported?

No

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Can i pay her medical bills from this account

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Answered in 3 minutes by:
11/17/2017
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,755
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Welcome to JustAnswer! My name is ***** ***** I will be able to assist you today

UTMA rules vary for state to state so please give me a moment to look up the specific regulations for California regarding medical bill payments.

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Customer reply replied 9 months ago
ok i will wait
Customer reply replied 9 months ago
are you there?

As you know, but it is important to remember UTMA custodial accounts allow adults to make a financial gift to a minor, and also name someone (including themselves) as the custodian of the account. The important word here is “gift.” The money in these accounts, once given, is the legal property of the minor.

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There are no IRS penalties on taking money out of a UGMA account.

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The donor nor the custodian can place any restrictions on the use of the money in the account once the minor becomes an adult. At that time, the child can use the money for whatever purpose they please.

In California, the age limit is 18-25, (depending on if the minor goes to college or not) which means that a UTMA account established in California must end before the minor reaches age 18-25

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The minor can use the money to pay the medical bills if that is what the minor chooses to do with the money

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If the minor is under the age of 18 then the custodian of an UTMA account has the right to collect, hold, manage, invest and reinvest a minor's property. They must act honestly and prudently

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I would be happy to clarify or expand my answer above if you have any additional questions

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Customer reply replied 8 months ago
Thank you - so as a custodian I can or cannot use these funds for her medical expenses?

You can as long as you are acting honestly and prudently as the custodian

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Customer reply replied 8 months ago
Can I use the CUTMA (California) to use for her medical bills - she is 8

Generally, medical bills are the responsibility of the parents of the child who is 8 years old and using the minor's funds in a CUTMA may be perceived as an abuse of a parents/custodians fiduciary duties.

When the minor is under the age of 18, the custodian of the CUTMA account has the right to collect, hold, manage, invest and reinvest.

The funds are from an irrevocable gift to the minor.

If the parents are responsible for the medical bills then it has generally been ruled that the parents must pay the medical bills without using the CUMA funds of the minor

Here is an example in which a man gifted cash from the proceeds of a sale of the family business to his granddaughter, naming his son as custodian.

"The son used some of the money to pay for the daughter's medical and dental bills, among other things. When his daughter sued him for raiding her accounts, he lost because it is considered duty of the parent to pay for those things as a matter of basic child support; not the responsibility of the minor to cover them. He was ordered to pay restitution, plus the amount of investment income the minor would have enjoyed under a reasonable compounding schedule, plus all of her legal fees. Additionally, he was removed as custodian due to his mishandling."

https://www.thebalance.com/spending-childs-utma-money-illegal-358134

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,755
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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