Can I Take Money Out of My Child’s Custodial Account?
We recently discussed the Florida Uniform Transfer to Minors Act (FUTMA), a state law that addresses situations where someone wishes to leave a gift of money or property to a minor. Under the FUTMA, the gift is turned over to a custodian–typically the minor’s parent or legal guardian–who holds the money or property on the child’s behalf. Once the minor turns 18, the custodian must close the UTMA account and turn the property over, although in some cases this may be delayed until the recipient turns 21 or 25.
Grandfather Hit With $200K Judgment After Withdrawing Funds From Granddaughters’ FUTMA Accounts
The critical thing to understand is that if you are the custodian of a FUTMA account, that money or property belongs to the minor, not you. This applies even in situations where you make gifts to your own child or grandchild while you are still alive. As a matter of law, once you make a “gift” to someone, it becomes their property. And the FUTMA states that a custodian must “observe the standard of care that would be observed by a prudent person dealing with property of another.”
And if you do spend your child’s FUTMA money on yourself–or even your family–your child may turn around and sue you for damages when they turn 21. If you think that would never happen, consider this recent case from Okaloosa County here in Florida. A grandfather set up FUTMA custodial accounts for his two granddaughters when they were babies. He made several deposits into those accounts, but later withdrew money to “reimburse his son for child support” and other court-ordered expenses related to the care of the two granddaughters.
Once the granddaughters turned 18 and realized what their grandfather had done, they turned around and sued him for violating the FUTMA. The grandfather, perhaps incredulous that his own grandchildren would take this step, never bothered to respond to the lawsuit. A Florida circuit court judge ultimately entered a default judgment against the grandfather, ordering him to pay over $200,000. This was actually significantly more than the amount of the grandfather’s withdrawals. The judge actually trebled (tripled) those damages, which is permitted under Florida law in cases involving “civil theft.”
The grandfather subsequently appealed the default judgment. But the Florida First District Court of Appeal affirmed the circuit court’s ruling. The appeals court noted the grandfather forfeited his right to challenge his granddaughter’s allegations when he failed to appear before the trial court. And in any event, the trial court’s judgment was “supported by competent substantial evidence.”
Speak With a Fort Myers Estate Planning Lawyer Today
FUTMA custodial accounts, like other kinds of irrevocable estate planning transfers, carry certain risks that you need to be aware of before making any final decisions. An experienced Fort Myers estate planning attorney can advise you as to those risks, as well as alternatives that may more accurately reflect your intentions. Contact the Kuhn Law Firm, P.A., today at 239-333-4529 to schedule a free estate planning consultation with a member of our team.