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Question

Difficulty: EasyCustomer Account Types and Ownership Structures

An investor opens a custodial brokerage account under the Uniform Transfers to Minors Act (UTMA) for her minor nephew. Which of the following statements correctly describes the ownership of the assets in this account?

  1. The assets are the irrevocable property of the minor child from the moment they are deposited.Answer
  2. B
    The custodian retains legal ownership of all assets until the minor reaches the age of majority.
  3. C
    The donor may revoke the gift and reclaim the account funds at any time prior to the minor turning 18.
  4. D
    The account is registered as a joint account owned equally by the custodian and the minor child.

Answer

The assets are the irrevocable property of the minor child from the moment they are deposited.
Under the Uniform Transfers to Minors Act (UTMA), any cash or securities placed into the account constitute an irrevocable gift. Beneficial ownership of the assets belongs solely to the minor child from the moment of deposit. The custodian manages the account on behalf of the minor until the child reaches the required age of majority.

Step-by-Step Solution

1
Identify the account registration structure for UTMA accounts.
UTMA accounts are custodial accounts established for the benefit of one minor with one custodian.
Understanding legal vs. fiduciary responsibilities is essential for customer account rules on the SIE exam.
2
Determine ownership rights of gifted assets.
Gifts to UTMA accounts are irrevocable, and ownership vests immediately with the minor child.
The custodian manages investments for the child's benefit, but the minor is the legal owner of the property.

Key Concept

UTMA Custodial Account Ownership Rules
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Topics

Customer Account Types and Ownership Structures