An official State of Texas website.
Revision 13-3; Effective September 1, 2013
Under the Uniform Transfers to Minors Act (UTMA), a person may establish a qualifying UTMA account in the name of a minor child. To set up the account, the person irrevocably gifts cash or other resources, such as stocks and bonds, to the account. The person names a custodian to the account, who frequently is the person who set up the account. The person does not incur a transfer of asset penalty by setting up a UTMA account.
The custodian on the account has a fiduciary duty to manage the account on behalf of the minor child. The custodian of the UTMA account may use UTMA account funds to purchase an education fund somewhat similar to the Texas Tomorrow Fund for a minor child who is qualified under state law.
The minor child must be under age 21 at the time the education fund is purchased. The qualified minor child would have to remain the named beneficiary of the education fund and the education fund must remain part of the holdings of the UTMA account.
State laws regulating the UTMA account establish appropriate expenditures of the education fund on behalf of the beneficiary, the minor child. The beneficiary takes control of the education fund from the custodian once the beneficiary obtains majority.
Consult with your regional attorney regarding state law governing UTMA accounts.